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ISSUE 5 | JULY 2017

F EDE RAL
R E S E RVE
BANK
ST. LOU IS

HOUSING MARKET
PERSPECTIVES
On the Level with Bill Emmons
Bill Emmons is an
assistant vice president and
economist at the Federal
Reserve Bank of St. Louis and
the senior economic adviser for
the Bank’s Center for Household
Financial Stability.

Homeownership and the
Racial Wealth Divide
A version of this article appeared earlier
in Shelterforce, a blog of the National
Housing Institute.1

FIGURE 1

Average Share of Homeowners’ Equity in Net Worth by Racial or Ethnic Group

H

60

50

40

Percent

omeowners‘ equity (HOE)—the
market value of residential real
estate minus the value of homesecured debt—has long been the
single largest component of wealth
for black and Latino families.2 On
average during the past quartercentury, HOE accounted for nearly
half of black and Latino families‘
wealth, compared with roughly a
third for Asian or other families and
about a quarter for white families
(Figure 1).3 During peaks in 1989
and around the financial crisis starting in 2007, HOE accounted for more
than half of the wealth of the average
black and Latino family.
After 2007, large price declines
and the loss of many homes through
foreclosure or other distressed transactions served to reduce the 2013
share of wealth attributed to HOE to
40 percent for black families and to 42
percent for Latino families. This same
share declined to 25 percent for white
families and to 32 percent for Asian or
other (henceforth, ”Asian“) families.
Despite its prominent role in black
and Latino families‘ balance sheets,

30

20

10
Black (average = 46%)

Hispanic (average = 43%)

Asian or other (average = 32%)

White non-Hispanic (average = 27%)

0
1989

1992

1995

1998

2001

2004

2007

2010

2013

SOURCE: Federal Reserve Board Survey of Consumer Finances (2013).
FEDERAL RESERVE BANK OF ST. LOUIS

HOE contributed less than other
assets to wealth accumulation during the 1989-2013 period covered by
the Federal Reserve’s latest Survey of
Consumer Finances (Figures 2 and
3). The same was true for the balance
sheets of Asian and white families
(Figures 4 and 5), which benefited
from much larger investments in
nonhousing assets.

1

The drag exerted by poorly performing housing assets on total
wealth accumulation is starkly illuminated when comparing the major
racial and ethnic groups. The table
on Page 3 shows the average annual
increase in the inflation-adjusted
value of homeowners‘ equity and all
other asset types for each group during the 1989-2013 period.

FIGURE 2

FIGURE 3

Change in Average Wealth: Homeownership (HOE)
vs. Other Assets for Blacks

Change in Average Wealth: Homeownership (HOE)
vs. Other Assets for Hispanics

300

250

300

Average black wealth, excluding HOE
Average homeowners’ equity for blacks

250

200

Index

Index

200

150

100

50

50

0

0
1989

1992

1995

1998

2001

2004

2007

2010

2013

1989

SOURCE: Federal Reserve Board Survey of Consumer Finances (2013).
NOTE: The
FIGURE
4 figure shows cumulative changes in the indexes (1989=100), adjusted
for inflation.

250

1992

1995

1998

2001

2004

2007

2010

2013

SOURCE: Federal Reserve Board Survey of Consumer Finances (2013).
NOTE: The
FIGURE
5 figure shows cumulative changes in the indexes (1989=100), adjusted
for inflation.

Change
in Average Wealth: Homeownership (HOE)
FEDERAL RESERVE BANK OF ST. LOUIS
vs. Other Assets for Asians

Change
in Average Wealth: Homeownership (HOE)
FEDERAL RESERVE BANK OF ST. LOUIS
vs. Other Assets for Whites
300

Average Asian (or other) wealth, excluding HOE
Average homeowners’ equity for Asians (or other)

250

Average white non-Hispanic wealth, excluding HOE
Average homeowners’ equity for non-Hispanic whites

200

Index

200

Index

150

100

300

Average Hispanic wealth, excluding HOE
Average homeowners’ equity for Hispanics

150

150

100

100

50

50

0

0
1989

1992

1995

1998

2001

2004

2007

2010

2013

1989

1992

1995

1998

2001

2004

2007

2010

2013

SOURCE: Federal Reserve Board Survey of Consumer Finances (2013).
SOURCE: Federal Reserve Board Survey of Consumer Finances (2013).
NOTE: The
figureReserve
shows cumulative
changes
in the indexes
(1989=100),
NOTE: The figure shows cumulative changes in the indexes (1989=100), adjusted
SOURCE:
Federal
Board Survey
of Consumer
Finances
(2013). adjusted
for inflation.
for inflation.
NOTE:
The figures above show cumulative changes in the indexes (1989=100), adjusted for inflation.
FEDERAL RESERVE BANK OF ST. LOUIS

As the table shows, the inflationadjusted value of HOE increased by
only 0.5 percent per year for Hispanic families and actually declined,
on average, by 0.4 percent per year
for black families. White and Asian
families, by contrast, saw significant
increases.

FEDERAL RESERVE BANK OF ST. LOUIS

Excluding HOE, rates of wealth
accumulation were comparable among
white, black and Hispanic families,
while Asian families benefited from a
significantly higher average gain. The
final column indicates that the heavy
concentration of black and Latino
families‘ wealth in housing, and HOE‘s

2

poor average returns, contributed to the
significant lag in average overall wealth
gains for these groups when compared
with white and Asian families.
Figure 6 shows cumulative percentage increases in total average wealth
during the 1989-2013 period. The
figure makes clear that the relatively

low cumulative increases in long-run
wealth for black and Latino families
resulted from large declines in asset
values after 2007, when the financial
crisis and then the Great Recession
took their toll. In contrast, from 1989
to 2004, Latino and black families
experienced greater average overall
wealth gains than white and Asian
families. The devastating collapse of
housing markets after 2007 hit black
and Latino families particularly hard
because so much of their wealth was
tied up in housing.
Drawing lessons from the past
quarter-century, our research proposes three principles for sound financial management:

Average Annual Percent Change in Inflation-adjusted Asset Values,
1989-2013

ENDNOTES
1 See http://shelterforce.org/2016/11/05/
homeownership-is-a-culprit-in-the-racial-wealthdivide.
2 See Figures 6 and 7 in William R. Emmons and
Bryan J. Noeth, “Economic Vulnerability and Financial Fragility,” Federal Reserve Bank of St. Louis
Review, September/October 2013, Vol. 95, No. 5,
pp. 361-88, https://files.stlouisfed.org/files/htdocs/
publications/review/13/09/Emmons.pdf.
3 All data are from the Federal Reserve Board’s
most recent (2013) Survey of Consumer Finances,
a triennial, nationally representative sample of
households. See https://www.federalreserve.
gov/econresdata/scf/scfindex.htm. The racial and
ethnic categories used throughout this article are
as follows: 1) non-Hispanic white, 2) non-Hispanic
African-American or black, 3) Hispanic of any race
and 4) Asian or other, which includes people of
Asian heritage as well as Native Americans, Pacific
Islanders, Native Hawaiians and other groups not
included elsewhere.
4 See William R. Emmons and Bryan J. Noeth, The
Demographics of Wealth, Federal Reserve Bank
of St. Louis, 2015, https://www.stlouisfed.org/
household-financial-stability/the-demographics-ofwealth.

-0.4%

2.3%

Total wealth
(all assets less all
liabilities)
1.0%

Hispanic

0.5

2.1

1.3

Asian or other

2.5

2.9

2.8

White non-Hispanic

1.2

2.3

2.0

All families

1.0

2.1

1.8

SOURCE: Federal Reserve Board Survey of Consumer Finances (2013).

FIGURE 6

Change in Average Total Wealth
300

250

2. Diversify assets broadly.

200

Index

Homeownership can make following these three tenets more difficult,
especially for economically and financially vulnerable families. Indeed, our
research suggests that families that
concentrate their wealth in housing
tend to accumulate less wealth on
average over time.

All other assets
less liabilities,
excluding HOE

Black

1. Maintain adequate liquidity.
3. Keep debt under control.4

Homeowners’
equity (HOE)

150

100

50

0

Average black wealth
Average Asian or other wealth
1989

1992

1995

1998

Average Hispanic wealth
Average white non-Hispanic wealth
2001

2004

2007

2010

2013

SOURCE: Federal Reserve Board Survey of Consumer Finances (2013).
NOTE: The figure shows cumulative changes in the indexes (1989=100), adjusted for inflation.
FEDERAL RESERVE BANK OF ST. LOUIS

The St. Louis Fed’s Housing Market Conditions Report
Housing Market Perspectives is published by the Community Development department
at the Federal Reserve Bank of St. Louis as part of its quarterly Housing Market Conditions report. The report provides an overview of housing market conditions for the U.S.
and for the seven states
that comprise the
Federal Reserve’s Eighth
District, as well as for the
District’s four main metro
areas: St. Louis; Little
Rock, Ark.; Louisville, Ky.;
and Memphis, Tenn.
See stlouisfed.org/hmc.

3