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July 28, 2011

further on impoverishment of Hispanics

The Pew Research Report, which I cited yesterday, prompted a New York Times article. I am including below the article. Must of the severe collapse of Hispanic assets is due to the housing collapse -- Hispanic households is trying to gain a foothold in home ownership were victims of the over-promotion of home ownership in America.

"Nearly two-thirds of Hispanics’ median net worth in 2005 came from home equity, according to the report, and when the housing market collapsed, so did their wealth. Median home equity for Hispanics fell by 51 percent in the period of the survey. The drop was compounded by the fact that Hispanics tended to live in the places that were hit hardest in the recession, like Florida and California, the report said."

The article:

WOODBRIDGE, Va. — Hispanic families accounted for the largest single decline in wealth of any ethnic and racial group in the country during the recession, according to a study published Tuesday by the Pew Research Center.

The study, which used data collected by the Census Bureau, found that the median wealth of Hispanic households fell by 66 percent from 2005 to 2009. By contrast, the median wealth of whites fell by just 16 percent over the same period. African Americans saw their wealth drop by 53 percent. Asians also saw a big decline, with household wealth dropping 54 percent.

The declines have led to the largest wealth disparities in the 25 years that the bureau has been collecting the data, according to the report.

Median wealth of whites is now 20 times that of black households and 18 times that of Hispanic households, double the already marked disparities that had prevailed in the decades before the recent recession, the study found.

“It’s a very stark reminder of the high share of minorities who live at the economic margins of this country,” said Paul Taylor, executive vice president of the Pew Research Center and an author of the report. “These data really show their economic vulnerability.”

Household wealth, also referred to in the report as net worth, is made up of assets, like a house, a car, savings and stocks, minus debts, like mortgages, car loans and credit cards. It is tracked by the Census Bureau in the Survey of Income and Program Participation, a broad sampling of household wealth by race and ethnicity.

Nearly two-thirds of Hispanics’ median net worth in 2005 came from home equity, according to the report, and when the housing market collapsed, so did their wealth. Median home equity for Hispanics fell by 51 percent in the period of the survey. The drop was compounded by the fact that Hispanics tended to live in the places that were hit hardest in the recession, like Florida and California, the report said.

Armando Moya, a Mexican immigrant from Woodbridge, outside Washington, experienced these swings of fortune first-hand. For a few happy years, he believed he had avoided his father’s fate of scraping by. He bought a house with a backyard and opened a taco restaurant with his brothers. His bank account was growing, and he took his family on vacations several times a year.

Mr. Moya lives in Prince William County, where the Hispanic population more than tripled from 2000 to 2010, according to the Migration Policy Institute, with many newcomers working in construction trades that were flourishing in the rapidly growing suburbs of Washington.

To capitalize on the influx, Mr. Moya, who is now 38 and had been working in restaurants since he came to the United States in the early 1990s, decided to start his own, and together with his brother opened Ricos Tacos Moya in 2005.

In the same year, he bought a house valued at $350,000. His monthly payments were more than $2,300, and with hungry workers filling his restaurant, he managed.

But when the collapse of the housing market swept like a wave through this Northern Virginia county, taking his house, and his bank account, and many of his customers along with it, he lost his middle-class lifestyle.

“Everything was going down,” he said.

Now he is back where he started, living with his family in a rented apartment, and working seven days a week in the taco restaurant. His house sold for $135,000 to a couple from Morocco, he said.

“My money changed,” he said. “I lost my house.”

The share of Americans with no wealth at all rose sharply during the recession. A third of Hispanics had zero or negative net worth in 2009, up from 23 percent in 2005. For blacks, the portion rose to 35 percent from 29 percent, and for whites, it rose to 15 percent from 11 percent.

About a quarter of all black and Hispanic households owned nothing but a car in 2009. Just 6 percent of whites and 8 percent of Asians were in that situation.

Whites were less affected by the crisis, largely because their wealth flowed from assets other than housing, like stocks. A third of whites owned stocks and mutual funds in 2005, compared with 8 percent of Hispanics and 9 percent of blacks.

The median value of stocks and mutual funds owned by whites dropped by 9 percent from 2005 to 2009. In comparison, the median value of holdings for those blacks who held stocks dropped by 71 percent, most likely because they had to sell when prices were low, Mr. Taylor said.

The median wealth of Hispanic and black households is at its lowest point since 1984, when the Census Bureau first conducted the study, the report said.

Mr. Moya counts himself lucky to still have his restaurant. He has to work weekends at a nightclub in Washington to keep up with his rent. His life is increasingly resembling his father’s — subsisting, without saving — but he has pinned his hopes for a better life on his sons, and he has discarded the idea of returning to Mexico.

“I want my house back,” he said. “I’m working for my house right now.”

July 27, 2011

Recession Study Finds Hispanics Hit the Hardest

This is how the New York Times characterized the Pew Research Center Report issued this week. Here are some key passages from the Report:

The Pew Research analysis finds that, in percentage terms, the bursting of the housing market bubble in 2006 and the recession that followed from late 2007 to mid-2009 took a far greater toll on the wealth of minorities than whites. From 2005 to 2009, inflation-adjusted median wealth fell by 66% among Hispanic households and 53% among black households, compared with just 16% among white households.

As a result of these declines, the typical black household had just $5,677 in wealth (assets minus debts) in 2009; the typical Hispanic household had $6,325 in wealth; and the typical white household had $113,149.

Moreover, about a third of black (35%) and Hispanic (31%) households had zero or negative net worth in 2009, compared with 15% of white households. In 2005, the comparable shares had been 29% for blacks, 23% for Hispanics and 11% for whites.

Hispanics and blacks are the nation’s two largest minority groups, making up 16% and 12% of the U.S. population respectively.

These findings are based on the Pew Research Center’s analysis of data from the Survey of Income and Program Participation (SIPP), an economic questionnaire distributed periodically to tens of thousands of households by the U.S. Census Bureau. It is considered the most comprehensive source of data about household wealth in the United States by race and ethnicity. The two most recent administrations of SIPP that focused on household wealth were in 2005 and 2009. Data from the 2009 survey were only recently made available to researchers.1

Plummeting house values were the principal cause of the recent erosion in household wealth among all groups, with Hispanics hit hardest by the meltdown in the housing market.

From 2005 to 2009, the median level of home equity held by Hispanic homeowners declined by half—from $99,983 to $49,145—while the homeownership rate among Hispanics was also falling, from 51% to 47%. A geographic analysis suggests the reason: A disproportionate share of Hispanics live in California, Florida, Nevada and Arizona, which were in the vanguard of the housing real estate market bubble of the 1990s and early 2000s but that have since been among the states experiencing the steepest declines in housing values.

Hispanics: The net worth of Hispanic households decreased from $18,359 in 2005 to $6,325 in 2009. The percentage drop—66%—was the largest among all groups. Hispanics derived nearly two-thirds of their net worth in 2005 from home equity and are more likely to reside in areas where the housing meltdown was concentrated. Thus, the housing downturn had a deep impact on them. Their net worth also diminished because of a 42% rise in median levels of debt they carried in the form of unsecured liabilities (credit card debt, education loans, etc.).

Blacks: The net worth of black households fell from $12,124 in 2005 to $5,677 in 2009, a decline of 53%. Like Hispanics, black households drew a large share (59%) of their net worth from home equity in 2005. Thus, the housing downturn had a strong impact on their net worth. Blacks also took on more unsecured debt during the economic downturn, with the median level rising by 27%.

Whites: The drop in the wealth of white households was modest in comparison, falling 16% from $134,992 in 2005 to $113,149 in 2009. White households were also affected by the housing crisis. But home equity accounts for relatively less of their total net worth (44% in 2005), and that served to lessen the impact of the housing bust. Median levels of unsecured debt among whites rose by 32%.

Asians: In 2005 median Asian household wealth had been greater than the median for white households, but by 2009 Asians lost their place at the top of the wealth hierarchy. Their net worth fell from $168,103 in 2005 to $78,066 in 2009, a drop of 54%. Like Hispanics, they are geographically concentrated in places such as California that were hit hard by the housing market meltdown. The arrival of new Asian immigrants since 2004 also contributed significantly to the estimated decline in the overall wealth of this racial group. Absent the immigrants who arrived during this period, the median wealth of Asian households is estimated to have dropped 31% from 2005 to 2009. Asians account for about 5% of the U.S. population.

No Assets: About a quarter of all Hispanic (24%) and black (24%) households in 2009 had no assets other than a vehicle, compared with just 6% of white households. These percentages are little changed from 2005.

Medians and Means: Just as the gap in median household wealth among racial and ethnic groups rose from 2005 to 2009, so too did the gap in mean household wealth. However, the mean differences are not as dramatic as the median differences. (A median is the midpoint that separates the upper half from the lower half of a given group; a mean is an average, and, in this case, the average is driven upward by households with high net worth). In 2005, mean white household wealth was 2.3 times that of Hispanics and 3 times that of blacks. By 2009, it was 3.7 times that of both Hispanics and blacks.

Wealth Disparities within Racial and Ethnic Groups: During the period under study, wealth disparities increased not only between racial and ethnic groups, they also rose within each group. Even though the wealthiest 10% of households within each group suffered a loss in wealth from 2005 to 2009, their share of their group’s overall wealth rose during this period. The increase was the greatest among Hispanics, with the top 10% boosting their share of all Hispanic household wealth from 56% in 2005 to 72% in 2009. Among whites, the share of wealth owned by the top 10% rose from 46% in 2005 to 51% in 2009. These trends indicate that those in the top 10% of the wealth ladder were relatively less impacted by the economic downturn than those in the remaining 90%.

July 8, 2011

In-migration from Mexico has dried up

“No one wants to hear it, but the flow has already stopped. For the first time in 60 years, the net traffic has gone to zero and is probably a little bit negative.” So says an immigration expert about illegal migration of Mexicans into the United States.

Legal migration has increased in the past five years, thanks in large part to better management of the visa process by American consulates in Mexico. But illegal migration has declined, and not primarily to stronger immigration enforcement by the United States. The major factors are smaller families, better education resources in Mexico, and better job projects in Mexico if you are educated.

These observations from a New York Times article.