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The Color of Money

Housing meltdown shouldn’t keep financially stable families from climbing upward

By Michelle Singletary
Washington Post / July 31, 2011

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“Life for me ain’t been no crystal stair.’’ That’s the defining line in Langston Hughes’ poem “Mother to Son.’’ It’s about a mother advising her son to keep climbing, even when the steps have tacks, splinters, and broken boards.

That’s what I want to tell those families who put too much of their faith in the American dream of owning a home.

A new report from the Pew Research Center found that the housing bubble that burst and the recession that followed took a far greater toll on the wealth of minorities than whites.

The gap is wide - the median wealth of white households is nearly 20 times that of black households and 18 times that of Hispanic households, according to Pew’s analysis of Census Bureau data.

But here’s what’s most concerning about the report. The enormous decline in housing prices had a much greater impact on the net worth of minorities, relative to whites, because housing assumes a larger share of their portfolios.

It is far too easy to say that minorities have only themselves to blame for their wealth decline because they bought homes they couldn’t afford. That argument would let so many off the hook. It would excuse the government for its failure to tame the lending predators. And it would absolve the lenders who came up with exotic mortgages.

Minorities, of course, were following the strategy that had been working for their white counterparts for decades. They were using their house to climb up the economic ladder because home equity was, and still is, the single largest contributor to household wealth.

Hispanics derived 65 percent of their net worth in 2005 from home equity. It was 59 percent for black households. For whites, 44 percent.

With the collapsed housing market come critics who want to blame the meltdown on policies aimed at boosting homeownership among minorities. It wasn’t the policies. It was the execution.

In 2002, President George W. Bush hosted a conference on minority homeownership. What he said then is still true today. “Two-thirds of all Americans own their homes, yet we have a problem here in America because fewer than half of the Hispanics and half the African-Americans own the home,’’ Bush said.

Bush noted that the number one barrier to increasing homeownership was coming up with a down payment.

But under the Obama administration, there’s a proposal to require a 20 percent down payment to qualify for the best mortgage rates. Such a requirement would disproportionately affect minorities. It wasn’t the lack of down payments that crippled the market. The fact is, lenders can and have made loans for years that perform well without people plunking down hefty sums upfront.

The Pew report is further evidence that we need to continue encouraging families to diversify their holdings. But at the same time, we should not abandon efforts to increase minority homeownership for financially stable families.

Michelle Singletary is a columnist for The Washington Post.

SOURCE: Bloomberg News