Hispanics hit hard by bursting of housing bubble 

The Pew Hispanic Center has issued a report http://pewhispanic.org/reports/report.php?ReportID=145 based on Census data showing that the net worth of Hispanic households declined 66% between 2005 and 2009. Also it shows the net worth of black households down 53% in the same period. This sounds terribly alarming, but it is less so than may at first appear.

As the Pew analysts note, the chief cause of this decline was “plummeting house prices.” Hispanics were hit hard because two-thirds of their 2005 wealth was in home equity.

But what we know now is that those earlier valuations of homes were illusory. Public policies of the Clinton and Bush administrations and the practices of Fannie Mae and Freddie Mac pumped out mortgages to people not formerly considered creditworthy, and by design and intention a disproportionate number of these borrowers were Hispanics and blacks. Especially Hispanics.

Look at where housing prices fell most when the housing bubble burst: the sand states of California, Nevada, Arizona and Florida. My analysis of the data tells me that in the 2007-09 period, about one-third of the foreclosed homeowners were Hispanics. Home buyers were able to get $400,000 mortgages with no money down on the basis of cash income from day laborer construction work.

Technically, that gave such people significant net worth as the housing bubble continued to inflate. But when prices crashed, the net worth disappeared. That’s what we’re looking at here.

Underneath these numbers are a lot of personal tragedies. And I think the nightmare experience of losing what seemed briefly to be significant wealth has the potential to reduce Hispanic immigration over the long haul. The data now show much lower rates of immigration and some reverse migration back to countries of origin, as one would expect in a recession or slowly growing economy. But there may be even more of a depressive effect on immigration, as the stories of the mass foreclosures are relayed through cellphone calls and Facebook postings back to home countries. The promoters who engineered the housing bubble said they were helping people achieve the American dream. But for many of the supposed beneficiaries, particularly Hispanics, it turned out to be more of an American nightmare. 

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Michael Barone

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