Four years ago, Roshanda Austin and her family nearly lost everything.
Her husband lost his job as a truck driver. She eventually lost her job as a quality-assurance manager, and the couple fell behind on their mortgage payments. Meanwhile, they had a teenage son about to start college.
“We had enough put away for about three house payments,” said Austin, 44, whose family lives in the Oak Cliff area of Dallas. “But that was gone fast.”
The Austins managed to stay in their home thanks to a housing counselor who negotiated a loan modification with their lender. But they blew through their savings. Today, they’re three months behind on their mortgage and facing foreclosure again.
The Austins are far from the only ones struggling. Many Americans have seen much of their wealth vanish in the past four years as a severe recession, widespread joblessness and plunging home prices have vaporized trillions of dollars in net worth.
The decline has affected virtually everyone across the demographic board — some more than others.
From 2005 to 2009, white households lost nearly $22,000 in net worth, more than black and Hispanic households. In percentage terms, however, minorities have taken the harshest blow.
A study by the Pew Research Center looked at the change in the inflation-adjusted median net worth of U.S. households — that is, assets such as homes, retirement accounts and savings minus liabilities such as mortgages, auto loans and credit card debts. Among its findings:
—Median wealth among Hispanic households amounted to $6,325 in 2009, down 66 percent from 2005.
—For Asian households, median wealth fell 54 percent to $78,066.
—For blacks, wealth declined 53 percent to $5,677.
—For whites, it dropped 16 percent to $113,149.
White households’ median wealth is nearly 20 times that of black households and 18 times that of Hispanic households — the highest ratios recorded since the government started tracking such data in 1984.
“These lopsided wealth ratios are … roughly twice the size of the ratios that had prevailed between these three groups for the two decades prior to the Great Recession that ended in 2009,” said the Pew report.
Wealth disparities not only increased among racial and ethnic groups, they also rose within them.
In each group, the top 10 percent’s share of wealth increased from 2005 to 2009, although their absolute wealth declined.
Among all groups, the main culprit for the decline in household wealth is housing, said the study, which was based on U.S. Census Bureau data and was released in July.
Housing declines have affected minorities more than whites because whites are more likely to have other sources of wealth, such as stocks and retirement accounts, according to Pew. While housing prices haven’t recovered, the stock market has partially come back since the recession ended in June 2009.
There’s also a geographic aspect. Large shares of Hispanics and Asians live in epicenters of the housing bust such as California, Florida, Nevada and Arizona, magnifying their exposure to wealth declines.
Broadly speaking, most Texas homeowners have absorbed smaller declines, because home prices here have been less volatile.
Home prices in the Dallas-Fort Worth area have fallen about 10 percent since peaking in April 2007, according to the S&P/Case-Shiller home price indexes. Meanwhile, U.S. prices have plunged nearly 32 percent since their peak in April 2006, including drops of 38 percent in Los Angeles, 49 percent in Miami and 59 percent in Las Vegas.
Still, housing has pushed plenty of North Texas residents into economic trouble.
Glendel Johnson, 65, planned on retiring at 62. After the recession hit, he decided to keep working to supplement his fixed income, but he cut back from full time to part time. He’s been working as a warehouse manager 20 hours a week for three years now.
Johnson was caught off guard when the mortgage payment on his Lancaster, Texas, home jumped after property taxes were added to what he owed. Previously he had paid his property taxes annually, and the jump in the monthly payment from $593 a month to $891 overwhelmed him. He spent what savings he had and ran up credit card debt.
“I wasn’t prepared for that,” said Johnson. “So I was unable to make my house payments.”
He said he had three months worth of letters threatening foreclosure on his house if he didn’t catch up with his payments.
He finally sought help from a housing counselor, the Urban League’s Vanessa Lay, who negotiated a smaller payment with Johnson’s lender.
A housing counselor for three years, Lay said she constantly has people walking through her door looking for help. But lately, the people she’s seeing are further behind on their mortgages — as much as 36 months behind.
It’s a familiar story at the national level.
The U.S. home ownership rate rose from 64 percent in early 1994 to 69.2 percent in early 2005, according to seasonally adjusted Census Bureau data. Amid the housing bust, however, that rate has edged down, falling to 66 percent in the second quarter of this year.
Meanwhile, declining housing prices have eaten into homeowners’ equity.
The net worth of a typical U.S. household decreased from $96,894 in 2005 to $70,000 in 2009, according to the Pew report. But assets other than home equity fell only $3,522.
For black and Hispanic households, home equity declines account for almost all of overall wealth decreases. Not counting home equity, the net worth of Hispanics fell just $479 and the net worth of blacks fell $626.
Including home equity, the net worth of Hispanics fell more than $12,000 and that of blacks fell nearly $6,500.
Twenty percent of U.S. households had zero or negative net worth in 2009, up from 15 percent in 2005. Among whites, the 2009 figure was 15 percent, while it was 31 percent for Hispanics and 35 percent for blacks.
Then there’s unemployment.
The U.S. jobless rate for all major racial and ethnic groups increased sharply during the recession and its aftermath. But the rate for blacks and Hispanics — at 16.7 percent and 11.3 percent, respectively, in August — remains significantly higher than the 8 percent rate for whites.
Juan Becerra said he first noticed signs of trouble at work in 2008.
At the time, he was a member of an eight-person tiling crew that worked on new homes in the Dallas area. Business started to come and go; a couple of busy weeks would be followed by a couple of slow weeks.
Then the layoffs started.
“There were eight of us, and little by little we went down to three,” said Becerra, 47, who came to Texas from the Mexican state of Jalisco in the 1980s.
He was laid off just as the U.S. recession was intensifying into the worst downturn since the 1930s.
Becerra, who is married and has four daughters, looked around for another tiling job.
“No one had any work,” he said.
With little savings, he asked friends and family for loans. He said he came close to losing his house in southern Dallas.
He turned to the Wilkinson Center, a nonprofit social services organization that provided food assistance and some financial help.
Becerra spent months volunteering at the center, stocking shelves, unloading trucks and helping with other duties. He also continued looking for work, and it paid off. Earlier this month, he landed a tiling job on remodeling projects.
Now, he said, he’s digging out of the financial hole and paying back the loans he received. He’s providing for his wife and daughters, who range in age from 5 to 13.
“For me, two straight weeks of work, you feel good,” he said. “You feel like there’s going to be a solution.”
Source: MCT Information Services