The Economic Recovery in Black, White, and Brown

As I recently observed, reading recent financial reports could reasonably lead you to believe that the financial crisis is over and that housing markets have rebounded.

While that's true for some people, the financial impact of the recent recession and housing crash varied -- quite dramatically -- by race.

The Recession in Black and White and Brown

Black and Latino households suffered significantly larger wealth losses during the recession than white households. Research shows that, from 2005-2009, white household wealth dropped 16% while black household wealth declined by 52%. Latino households lost a whopping 66% of their pre-recession wealth.

For a number of reasons, blacks and Latinos have had higher foreclosure rates than whites since at least 1990, and they had disproportionately higher foreclosure rates during the recession than white homeowners. A recent study found that blacks who bought homes during the housing bubble are 50% more likely to lose their homes and become renters than similarly situated white buyers.

Black and Latino households had larger wealth losses during the recession mostly because home equity comprises a much larger percentage of their overall wealth. While housing equity makes up about 58% of household wealth for white households, housing equity is 67% of overall Latino wealth and a staggering 92% of black household wealth. When Latinos and (especially) blacks lost their homes, they also lost their wealth.

The recession widened the racial wealth gap. Whites overall had four times the wealth as blacks and Latinos before the recession, but had approximately six times the wealth of blacks and Latinos by the time the recession ended.

The Economic Recovery in Black and White and Brown

Fast forward to 2014. The recession has been over for five years.

The Federal Reserve reports that banks have relaxed their lending standards and made it easier to buy homes for borrowers with good credit who can qualify for prime mortgages. Although sales for new, single-family houses slowed this summer, mortgage delinquencies and foreclosure rates have fallen well below the record highs they reached during the housing crisis. Most households are no longer trying to save face by selling their homes in short sales.

Things are looking promising if you live in a high-income, homeowner household. The picture is not as rosy for black and Latino households.

The 2013 Federal Reserve Survey of Consumer Finances (SCF) observes that average net worth for white families increased between 2010-2013, while average net worth for non-white families decreased.

While unemployment rates have fallen from the record highs they reached in 2010 and black and Latino unemployment rates are lower than they were five years ago, their employment rates are still high relative to whites.

For example, the overall black unemployment rate (11.4%) is more than double the white rate (5.3%). The Latino unemployment rate (7.3%), while lower than the black rate, is still higher than the white and overall rate (6.1%).

Minority and lower-income neighborhoods, particularly hard hit by foreclosures during the recession, still have not recovered. A recent study reveals that home prices in black and Latino neighborhoods are still depressed and that a disproportionate percentage of homeowners in those neighborhoods have "underwater homes" (i.e., owners owe more on their mortgages than the homes are worth).

Though banks have relaxed lending standards for borrowers who qualify for prime mortgages, mortgage credit remains elusive for lower-income households and for blacks and Latinos (who are disproportionately lower-income). In fact, housing groups are now concerned that tight lending standards are shutting blacks and Latinos out of mortgage markets and depriving them of the opportunity to build wealth. An interactive map graphically depicts how black and Latino households nationally have been locked out of the economic recovery.

In a flashback to housing practices from the 1950s, the New York attorney general recently sued a bank for "redlining," i.e., refusing to approve mortgage loans to borrowers in black neighborhoods.

While some households and neighborhoods have recovered from the recession, most black and Latino households and neighborhoods are still waiting to recover.