The National Association of Real Estate Brokers 64th Annual Convention
Presented by:
LaVaughn M. Henry, Ph.D.
Vice President & Sr. Regional Officer
Fed. Reserve Bank of Cleveland
August 7, 2011
4. Homeownership Rates have decreased for all
demographics groups since their peak…
1994Q1 Peak 2011Q2
90.0
80.0 76.2 73.7
69.8
70.0
60.0
49.7 50.1
50.0 44.2 46.6
42.1 40.3
40.0
30.0
20.0
10.0
0.0
African-American Hispanic White
Source: Census Bureau
4
5. …but African-American Homeownership Rates fell
sharply during the economic boom period..
52.0
50.0
48.0
46.0
44.0
42.0
40.0
Source: Census Bureau
5
6. …much before House Price Appreciation
began to fall…
S&P Case Shiller National Price Index AA Homeownership Rate
20.0% 51.00
Correlation Coefficient: 0.34
15.0% 50.00
10.0% 49.00
5.0% 48.00
0.0% 47.00
-5.0% 46.00
-10.0% 45.00
-15.0% 44.00
-20.0% 43.00
-25.0% 42.00
2004Q1
2009Q3
1998Q1
1998Q3
1999Q1
1999Q3
2000Q1
2000Q3
2001Q1
2001Q3
2002Q1
2002Q3
2003Q1
2003Q3
2004Q3
2005Q1
2005Q3
2006Q1
2006Q3
2007Q1
2007Q3
2008Q1
2008Q3
2009Q1
2010Q1
2010Q3
Source: S&P Case Shiller, Mortgage Bankers Association
6
7. …and much before Subprime Foreclosure
Rates began to rise…
Foreclosure Rate - Subprime Loans AA Homeownership Rate
5.00 51.00
Correlation Coefficient: -0.28
4.50 50.00
4.00
49.00
3.50
48.00
3.00
47.00
2.50
46.00
2.00
45.00
1.50
44.00
1.00
0.50 43.00
0.00 42.00
Source: Mortgage Bankers Association
7
8. …and before Unemployment Rates for African-
Americans began to rise.
AA Unemployment Rate AA Homeownership Rate
18.00 51.00
Correlation Coefficient: -0.31
16.00 50.00
14.00 49.00
12.00 48.00
10.00 47.00
8.00 46.00
6.00 45.00
4.00 44.00
2.00 43.00
0.00 42.00
Source: S&P Case Shiller, Mortgage Bankers Association
8
10. Unemployment Rates of African-Americans remain
twice as high as that of white Americans…
African-American Hispanic White, non-Hispanic
18.00
16.00
14.00
12.00
10.00
Rate
8.00
6.00
4.00
2.00
0.00
Nov-00
Dec-02
Nov-05
Dec-07
Nov-10
Apr-01
Sep-01
Oct-03
Mar-04
Apr-06
Sep-06
May-08
Oct-08
Mar-09
Apr-11
Jan-00
Feb-02
May-03
Jan-05
Feb-07
Jan-10
Aug-04
Aug-09
Jul-02
Jun-00
Jun-05
Jul-07
Jun-10
Source: : Bureau of Labor Statistics
10
11. …with Employment Growth of African-Americans
suffering greatly during the Great Recession.
10.0%
8.0%
6.0% 4.6%
3.7%
4.0%
2.0%
0.0%
White
-2.0% -1.2% Black
-4.0%
Hispanic
-6.0%
-5.7%
-8.0%
Source: : Bureau of Labor Statistics, Current Population Survey
11
12. A major cause of the decline has been the loss of jobs
in the manufacturing and construction sectors…
15.0%
10.0%
5.0%
0.0%
Total Nonfarm
-5.0%
Government
-10.0% Construction
Manufacturing
-15.0%
-20.0%
-25.0%
Dec-03 to Dec- Dec-05 to Dec- Dec-07 to Jun-09 to Jun-
05 07 Jun-09 11
Pre-Bubble Housing Bubble Recession Recovery
Source: : Bureau of Labor Statistics, Current Population Survey
12
14. Median Household Income fell significantly for all
groups during the Great Recession…
10.0%
8.0%
12-Month %’age Change
6.0%
4.0%
2.0%
African-American
0.0% Hispanic
White
-2.0%
-4.0%
-6.0%
Source: : Census Bureau
14
15. …however, Median Net Worth declined was
largest for persons of color…
2005 2009
$180,000
$168,103
$160,000
$140,000 $134,992
$120,000 $113,149
$100,000
$78,066
$80,000
$60,000
$40,000
$18,359 $12,124
$20,000
$6,325 $5,677
$-
Whites Hispanics African-Americans Asians
Source: : PEW Research Center
15
16. …with the collapse of the housing market
being the primary cause of the decline.
Median Net Worth of Households with and Without Home Equity, 2005 and 2009
Total Excluding Home Equity
2005 2009 Change 2005 2009 Change
All $96,894 $70,000 -$26,894 $17,088 $13,566 -$3,522
Whites $134,992 $113,149 -$21,843 $32,961 $29,169 -$3,792
Hispanics $18,359 $6,325 -$12,034 $3,285 $2,806 -$479
African-
$12,124 $5,677 -$6,447 $1,676 $1,050 -$626
Americans
Asians $168,103 $78,066 -$90,037 $27,137 $20,300 -$6,837
Source: : PEW Research Center
16
17. African-Americans and Hispanics are much more
dependent on the housing market for wealth creation.
Whites Hispanics African-Americans Asians
2005 2009 2005 2009 2005 2009 2005 2009
Own
44% 38% 65% 55% 59% 56% 50% 35%
Home
Stocks
and
8% 16% 3% 3% 2% 5% 6% 32%
Mutual
Funds
IRA and
KEOUGH 9% 10% 3% 6% 5% 6% 6% 6%
accounts
401(k)
and thrift 11% 12% 8% 11% 12% 14% 10% 10%
accounts
Unsecured
-3% -5% -5% -13% -7% -12% -3% -4%
Liabilities
Source: : PEW Research Center
17
18. However, despite the downturn, wealth
concentration grew within all groups.
Share of Wealth Held by the Wealthiest 10% of Households, 2005 and 2009
2005 2009
80%
72%
Percent of Group Wealth Share
70% 67%
59% 61%
60% 56%
51%
50% 46% 44%
40%
30%
20%
10%
0%
Whites Hispanics African-Americans Asians
Source: : PEW Research Center
18
19. So where do we go from here?
Wealth creation in the AA community is critically
dependent upon improvement in the labor market
National unemployment rates are projected to
remain high through at least the end of 2012,
thwarting significant improvement in the housing
market
Significant recovery in the AA housing market will
require non-traditional approaches to address
issues of economic blight, foreclosure, and credit
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