Recession's Biggest Losers Are Latinos

(Photo by Scott Olson/Getty Images)

(Photo by Scott Olson/Getty Images)  (2005 Getty Images)

Blame the housing market. The real estate collapse in 2005 lead to a dramatic decline in Latino wealth according to a Pew Research Center study on wealth in America released Tuesday. 

In fact, Pew found that Latinos accounted for the largest single decline in wealth of any racial or ethnic group during the U.S. recession.

According to the study:

Two-thirds of Hispanics' median net worth in 2005 came from home equity. When the housing market collapsed, so did Latino wealth. Median home equity for Hispanics fell by 51 percent in the period of the survey. 

Second, Hispanics were more likely to live and buy homes in states such as California, Florida, Nevada and Arizona, which were on the forefront of the real estate bubble, enjoying early gains in home values.

The pursuit of the American dream through the purchase of a new home has now proven to be a major factor into the largest wealth gap between white and minority Americans in over 25 years.

"What's pushing the wealth of whites is the rebound in the stock market and corporate savings, while younger Hispanics and African-Americans who bought homes in the last decade — because that was the American dream — are seeing big declines," said Timothy Smeeding, a University of Wisconsin-Madison professor who specializes in income inequality.

According to the Pew study, the housing boom of the early to mid-2000s boosted the wealth of Hispanics in particular, who were disproportionately employed in the thriving construction industry. 

But those gains quickly shriveled in the housing bust. After reaching a median wealth of $18,359 in 2005, the wealth of Hispanics — who derived nearly two-thirds of their net worth from home equity — declined by 66 percent by 2009. 

Among blacks, who now have the highest unemployment rate at 16.2 percent, their household wealth fell 53 percent from $12,124 to $5,677.

In contrast, the median household wealth of whites dipped a modest 16 percent from $134,992 to $113,149, cushioned in part by a stock market recovery that began in mid-2009.

"The findings are a reminder — if one was needed — of what a large share of blacks and Hispanics live on the economic margins," said Paul Taylor, director of Pew Social & Demographic Trends. 

"When the economy tanked, they're the groups that took the heaviest blows."

The latest data come as President Barack Obama and congressional leaders try to reach a deal to avoid a U.S. default on its financial obligations after Aug. 2.

Democrats and Republicans have been wrangling over proposals that could cut trillions of dollars from programs such as Medicare and Social Security. 

They are divided over whether to bring in new tax revenue, such as by closing corporate tax loopholes or increasing taxes for the wealthy.

The Associated Press contributed to this report.

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