Michael A. Fletcher, Washington Post, January 25, 2015
African Americans for decades flocked to Prince George’s County to be part of a phenomenon that has been rare in American history: a community that grew more upscale as it became more black.
The county became a national symbol of the American Dream with a black twist. Families moved into expansive new homes, with rolling lawns, nearby golf courses and, most of all, neighbors who looked like them. In the early 2000s, home prices soared–some well beyond $1 million–allowing many African Americans to build the kind of wealth their elders could only imagine.
But today, the nation’s highest-income majority-black county stands out for a different reason: Its residents have lost far more wealth than families in neighboring, majority-white suburbs. And while every one of these surrounding counties is enjoying a strong rebound in housing prices and their economies, Prince George’s is lagging far behind, and local economists say a full recovery appears unlikely anytime soon.
The same reversal of fortune is playing out across the country as black families who worked painstakingly to climb into the middle class are seeing their financial foundation for future generations collapse. Although African Americans have made once-unthinkable political and social gains since the civil rights era, the severe and continuing damage wrought by the downturn–an entire generation of wealth was wiped out–has raised a vexing question: Why don’t black middle-class families enjoy the same level of economic security as their white counterparts?
The impact of the financial devastation of the past several years is hardly visible along the quiet, well-tended streets of many Prince George’s neighborhoods. The county has the highest foreclosure rate in the District region, yet few houses appear to be abandoned.
The recession and tepid recovery have erased two decades of African American wealth gains. Nationally, the net worth of the typical African American family declined by one-third between 2010 and 2013, according to a Washington Post analysis of the Federal Reserve’s Survey of Consumer Finances, a drop far greater than that of whites or Hispanics.
The top half of African American families–the core of the middle class–is left with less than half of the typical wealth they possessed in 2007. The wealth of similarly situated whites declined by just 14 percent.
Overall, the survey found, the typical African American family was left with about eight cents for every dollar of wealth held by whites.
Not only is African American wealth down, but the chances of a quick comeback seem bleak. Just over a decade ago, homeownership–the single biggest engine of wealth creation for most Americans–reached a historic high for African Americans, nearly 50 percent. Now the black homeownership rate has dipped under 43 percent, and the homeownership gap separating blacks and whites is at levels not seen in a century, according to Boston University researcher Robert A. Margo.
For a substantial number of African Americans who remain homeowners, their properties only hurt their net worth. According to the Fed survey, 1 in 7 owed more on their mortgages than their homes were worth in 2013, a sharp increase from 2010.
By comparison, just 1 in 18 white homeowners was underwater, an improvement from 2010. Also, African Americans own fewer businesses, stocks and other equities than whites–assets that have all recovered sharply since the recession.
Scholars who have studied this dynamic and real estate professionals who have lived it say the price differences go beyond those that might be dictated by the perceived quality of schools, or the public and commercial investment made in particular neighborhoods. The big difference maker, they say, is race.
Mark E. Alston, who has worked for more than two decades as a real estate broker in Los Angeles and serves as political action chairman for the National Association of Real Estate Brokers, a trade group, noted that View Park, a mostly black and upper-middle-class community in Los Angeles featuring spacious Mediterranean and Spanish Colonial style homes not far from downtown, draws few white home buyers. Not coincidentally, he said, prices there are lower than in otherwise comparable Los Angeles neighborhoods.
“Regardless of geography, if you own a home in a majority-minority neighborhood, you are going to get less value out of it than if you own a home in a homogeneous white neighborhood,” said Dorothy A. Brown, an associate vice provost and law professor at Emory University, who has studied the impact of race on home prices. “This transcends class.”
Tale of two Zip codes
A Washington Post analysis of housing values in two suburban Washington Zip codes–one in a mostly black Bowie, Md., neighborhood of Prince George’s County and the other in a mostly white area of Reston, Va.–sketches a vivid picture of how African Americans have been hit harder by lagging home prices in the recession’s wake.
Average values in the two communities were virtually identical between 2000 and 2005, though prices in Bowie peaked at more than $620,000 in 2006, while home prices in Reston topped out a year earlier at $520,000.
Then the bust came. In 2009, Reston prices bottomed out at $360,000. In Bowie, they fell much farther, dropping to about $330,000 in 2012–nearly half.
By 2014, Reston prices bounced back to within $65,000 of their peak, while prices in the Bowie Zip code were still nearly $300,000 below their high point.
African Americans were able to build some wealth as they moved to suburbs in large numbers beginning in the 1980s. That migration helped transform Prince George’s from a semi-rural, predominantly white county into a center of black political power and a magnet for a fast-expanding black middle class. The county became home to thousands of black-owned businesses, including many government contractors, and for the past two decades its political leadership has been largely African American.
Fast-rising home prices that accompanied the housing boom seemed to herald a new day. But those gains proved to be short-lived.
‘I feel stuck’
African Americans were disproportionately targeted for predatory loans, which only intensified the financial damage caused by the downturn. Now the old housing market dynamics have returned, with relatively few blacks getting home loans, trimming housing demand in African American communities and putting a clamp on prices.