The 2000s were rough years for the economy, and particular, for the housing market. Homebuyers, especially first time buyers, were at the mercy of an overall economic recession, as well as a roller coaster of peaks and plummets in the housing market.
First time homebuyers of all kinds suffered declines in their net worth if they bought a house during the Great Recession. But new research from Johns Hopkins University reveals that black first time homebuyers experienced much greater losses in net worth than their white counterparts.
According to one of the study’s authors, professor of policy studies Sarah Newman, “we expected that both whites and blacks would lose if they purchased right around the recession and they did,” but the disparity between the races was even bigger than they had imagined.
Let’s break this down
For example, both white and black first time homebuyers lost net worth if they purchased a home between 2007 and 2009, but while whites lost 33 percent of their net worth, blacks lost 43 percent.
Even more startling is that sometimes, black homebuyers lost net worth while whites gained.
Black homeowners who bought houses between 2003 and 2005 lost 23 percent of their net worth while their white counterparts gained 50 percent; similarly, blacks purchasing houses between 2005 and 2007 lost an average of $16,911 in net worth, while whites who bought a house during the same period gained $24,000.
So why is this the case?
These inequalities reflect the overall gap in wealth between racial groups in the U.S.
Black families lose more of their net worth when the housing market is on the rocks because their overall wealth tends to be concentrated in their homes, rather than in other assets.
Says Newman, “it’s of great concern, because for many of these families that was their wealth, that’s what they have.”
Black-owned homes were also far less likely to appreciate in value, especially if the homes were in majority black communities.
Newman says that many black families would have fared better if they hadn’t purchased a home at all, and instead put that money “under the mattress.”
When compared, the disparity between the races indicates that there remains a real, tangible, unfortunate, embarrassing racial divide in America.