Homeownership is not only a fundamental part of the American Dream, it is also the cornerstone of wealth building in this country. National Association of REALTORS® Chief Economist Lawrence Yun states “Homeownership…has historically been one of the primary sources of wealth accumulation for middle-class families.”[i] So what does it mean when the average middle or working class family cannot afford to purchase a home and how does this trend impact African Americans?
Wealth is the value of all assets owned minus all debts. For many, a home is the single greatest asset they possess. A paper by the Joint Center for Housing Studies at Harvard University concludes that home ownership still represents an important opportunity for low income and minority populations to build wealth, even in the after effects of the Great Recession. However, the U.S. Census Bureau reports that on a national level, home ownership for blacks is 42.4%, significantly lower than the national rate of 63.7%.[ii] The Urban Institute produced a study that shows what this wealth inequality looks like. On average, African Americans hold the least amount of wealth in the country and are 7 times less wealthy than whites.
So what does a lack of wealth mean in real terms? It equates to a lack of resources in cases of opportunity or emergency, and significantly, it means families do not have the ability to pass on wealth to future generations. The absence of this financial building block can have multi layered effects on the future, from the amount of student loan debt a person has to incur, to the ability to save during income producing years, and ease of life in retirement years. While not the only part of a healthy financial plan, home ownership is a key element in making sure African Americans have the ability to build and convey wealth.
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