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When the housing market collapsed in 2006, it led to one of the hardest-hitting, wide-reaching financial crises that the United States had felt in decades.
The Great Recession, as it became known, had a disproportionate impact on minorities – especially Latinos – that still impacts their ability to achieve the goal of home ownership. It also keeps many Latinos from fully participating in the economy.
A study from the Federal Reserve Bank of St. Louis found that the housing prices during the recession fell more in urban, low-income areas and that minorities had far larger shares of their personal wealth “tied up” in their homes than whites.
“The housing market collapse affected millions of American families across the country, but it hit black and Latino families especially hard because so much of their wealth was tied up in housing,” the report said.
Leading up to the housing collapse, Black and Latino families saw little overall growth in personal wealth, with the bulk of their assets tied to home ownership. When the financial crisis that preceded the Great Recession hit, it took a significant toll on their finances that many have not yet recovered from.
“In contrast, from 1989 to 2004, black and Latino families experienced greater average overall wealth gains than white and Asian families,” said William Emmons, an economist who was the author of the report in an interview with Business Insider.
According to the report, in the last 25 years, homeowners’ equity (the value of a home minus the amount of mortgage debt remaining) accounted for close to 50% of all wealth accumulated by Black and Latino families.
After 2007, “large price declines and the loss of many homes through foreclosure” reduced the wealth from equity.
You can read more about the impact of economics on Latino health here.
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