Inequality in America has traditionally followed familiar patterns of race, age and education. Those long-standing gaps have been magnified by the real estate boom and now the historic bust, according to an Associated Press analysis of 2007 Census Bureau data.
While minorities have made significant gains in wealth and home ownership since 1990, “things are going into reverse gear,” and now the homeownership rate for blacks and Hispanics is falling, said Edward Wolff, a New York University economist who studies income and wealth distribution.
The AP’s analysis reveals the enormous scope of the U.S. housing market bust and how unevenly the burdens are spread, both geographically and demographically. And the situation is worsening–a record 10 percent of U.S. homeowners with a mortgage are at least one payment behind or were in foreclosure as of last fall, compared with 7.5 percent a year earlier and just under 6 percent in 2006.
The burden is clearly more arduous among minority households, the AP analysis found.
Just under a third of Hispanic homeowners spend at least 38 percent of their income on housing expenses, compared with about a quarter of Asian and black households and nearly 16 percent of white households.
In much of the country, the trend is more pronounced. For example, included among those who spent at least 38 percent of their income on housing are:
About 40 percent of black borrowers in California, Nevada, Oregon and Massachusetts.
More than 30 percent of Asian borrowers in California and Florida.
Nearly half of Hispanic homeowners in Rhode Island and at least 40 percent in Alaska, California, Florida, Hawaii, Maryland, New Jersey and New York.
Many Latino families wound up with expensive subprime mortgages because they often have cash income and no bank account, said Janis Bowdler, associate director for wealth building at National Council of La Raza in Washington.
It is common for Latino families to have stable incomes, but limited credit histories–and hence lower credit scores, which lenders use to gauge risk. Many have multiple sources of income, some of it in cash.
During the housing boom, consumer advocates say it was both faster and more profitable for mortgage brokers and loan officers to put Hispanic families in loans that didn’t require proof of income, but charged higher interest rates.
Now, Hispanic households like the Cazares family of Visalia, Calif are caught up in the mortgage crisis. Out of work for more than a year after contracting a rare disease caused by an airborne fungus, Joel, 36, brings in $550 a week in disability payments. His wife Maria, 34, makes about that much money weekly by working as a hair stylist.
They haven’t made their $2,500 home loan payment in four months. The couple, who have three kids, have been waiting since October for a loan modification from IndyMac Bank, which was seized by the federal government last July. They hope it will bring their payment down to a more manageable level of around of $1,500.
In the meantime, they buy supersized bags of generic cereal to make ends meet. They’ve canceled their Internet service and are only using one of their two cars, a pickup truck, because it gets better gas mileage.
As the pain from the mortgage crisis spreads, Washington is abuzz with talk of new efforts to stabilize the housing market and stop the freefall in home prices. President-elect Barack Obama has pledged to direct up to $100 billion in financial bailout money toward a sweeping effort to prevent foreclosures.
Frustrated housing counselors around the country say that if the Bush administration had grasped the severity of the foreclosure crisis earlier and enacted more ambitious programs long ago, the pain for American families and the economy might not be so severe.
To be sure, housing counselors acknowledge that some borrowers only have themselves to blame. They clearly got in over their heads and many knowingly took out risky loans. But they also say that mortgage brokers and lenders took advantage of the elderly, immigrants and the unsophisticated.