Although Black and Hispanic Americans have accumulated more wealth in recent years, their net worth still lags far behind that of White Americans.
Although Black and Hispanic Americans have accumulated more wealth in recent years, their median net worth still lags far behind that of White Americans.
The net worth of the typical Black and Hispanic household in 2022 was $44,900 and about $61,600, respectively, according to the Federal Reserve’s latest Survey on Consumer Finances, a triennial report released this month that provides a comprehensive look at Americans’ financial circumstances.
That’s up more than 61% for Black households and 47% for Hispanic households since the Fed’s last survey in 2019.
Even with these gains, their wealth remains only a fraction of that of White households, whose median wealth was $285,000 last year, up 31% from 2019.
Asian Americans had the highest median net worth at $536,000, the first year their wealth was broken out in the survey. Edward Wolff, a professor of economics at New York University, said Asian Americans have higher incomes and much lower poverty rates than White Americans, which drives up their median wealth.
The growth in wealth for typical Black and Hispanic households provides them more financial stability, Ana Hernández Kent, senior researcher at the Institute for Economic Equity at the Federal Reserve Bank of St. Louis, said on October 20.
This means “these families are better able to weather a future downturn,” she said. “So, it’s extremely positive.”
Overall, however, Kent called the changes in wealth between 2019 and 2022 “a mixed bag” because of the “incredible amount of wealth inequality in the US.”
Record wealth levels
The median wealth of White and Black Americans has now surpassed their earlier peaks, which were prior to the Great Recession, Wolff said.
Hispanic households’ median net worth had already hit a record in 2019 and has since continued to rise.
The growth in housing wealth – a home’s market value minus any outstanding mortgages or loans secured by the home – has fueled the overall rise in net worth among Black and Hispanic Americans, in particular, according to the Fed survey.
Soaring home prices in recent years have boosted homeowners’ equity. Meanwhile, Wolff said, higher inflation also helped increase the net worth of Black and Hispanic households.
Net worth consists of assets minus debts, so if the value of someone’s debt declines, their net worth increases.
Black and Hispanic households typically have larger mortgages and because the value of their debt declined after adjusting for inflation between 2019 and 2022, their wealth increased, Wolff said.
“It’s really a combination of rising house prices and the high mortgage debt of Black and Hispanic families that has led to greater growth in their wealth than White families,” he said.
Meanwhile, Black Americans have made strides in home ownership since 2013, though their rate remains below where it was in 2007, before the Great Recession led to many people losing their property. The home ownership rate for Hispanic Americans grew between 2019 and 2022 and now exceeds what it was in 2007.
The share of White Americans owning homes remained essentially flat between 2019 and 2022 and has yet to surpass its 2007 rate.
In addition, larger shares of Black and Hispanic households owned stock and businesses in 2022, positioning them to keep better pace with White households when the value of these assets rise, according to the survey.
These increases in asset ownership helped modestly narrow the wealth gap ratio between White Americans and Black and Hispanic Americans between 2019 and 2022.
In 2022, the typical White household had about six times as much wealth as the typical Black household and five times as much as the typical Hispanic household.
That’s an improvement from 2016, when White Americans had 10 times the wealth of Black Americans and about eight times that of Hispanic Americans.
Still, these gains are tempered by the fact that the wealth gap widened by about $50,000 when comparing the net worth of White Americans in 2022 with that of Black and Hispanic Americans in dollars.
Income picture is gloomier
While Americans grew more wealthy in recent years, their income has essentially stagnated.
Median income rose by 1.3% for White households, while it slipped 1.6% and 1.1% for the Black and Hispanic households, respectively, between 2019 and 2022.
Looking ahead, Americans generally are more pessimistic about the future. The share of Black and Hispanic Americans who say they are uncertain about their income next year grew by 14.2 percentage points and 10.9 percentage points, respectively. Among White households, the increase in uncertainty about their income in the next year rose by 7 percentage points.
What’s more, the share of households that expect the economy to get worse over the next five years is at or near record highs across all groups.
“The recent improvements in wealth ratios across races is promising, but families’ increased financial uncertainty suggests continued improvements may not persist in the future,” the Fed concluded.
Source: CNN
Featured image: Photo by Gary Hershorn, Corbis News, Getty Images
