Hispanic wealth in the United States is expected to triple by 2025 – provided we are not hit by another mega recession and trends continue more or less as they are today.
A study conducted by the St. Louis Federal Reserve Bank, in Missouri, anticipates that Hispanic families’ net worth or wealth (i.e. assets minus liabilities) will range between $2.5 trillion and $4.4 trillion 11 years from now.
In 2010, Hispanic families had about $1.4 trillion of net worth or approximately 2.2 percent of U.S.’s total wealth.
The range offered by the St. Louis Fed study places the Hispanic community owning between 2.6 and 3.2 of the nation’s total wealth in 2025.
However, even when these estimates would accomplish a new record for the Latino demographic, most of Hispanic families would remain far less wealthy than white and Asian families.
For the study, St. Louis Federal Reserve Bank, one of the 12 banks that make up the United States central bank, used census projections of population growth and took two different approaches given the uncertainty due to the recent recession.
“In the first approach there would be a reversion to [pre-recession] trend by 2025 and the growth would begin at the 2010 level with no reversion to the previous [2008 – 2010] trend,” Dr. William Emmons, Senior Economic Advisor of the Center for Household Financial Stability at the St. Louis Federal Reserve, told Fox News Latino.
“It assumes the housing market will bounce back to something like the previous trend,” he explained.
Assuming the recession’s losses are not permanent, the St. Louis Federal Reserve’s first scenario showed the Hispanic share of total wealth increasing to 3.2 percent by 2025 and reverting to growth trends from previous decades before the recession.
In the St. Louis Federal Reserve’s second scenario, the recession losses are irretrievable and the Hispanic share of total wealth would only increase because of the population’s exceptional projected growth. This would result in average growth resuming to 2010 levels of 2.6 percent.
“The second assumption is a little bit more likely [because] house prices were probably over valued in 2007 in many places – especially in places with a lot of Hispanic families – where house prices were very, very high relative to income,” Emmons said. “[The housing market] crashed quite a bit and there has been some bounce back, but I think it doesn’t look like we’re going to go back to the trend that was in power before.”
Regardless of the assumptions used however, the St. Louis Federal Reserve stated that total Hispanic wealth is likely to grow notably faster than overall wealth. And a significant portion of this increase, the study noted, would result from the Hispanic population growing faster than any other racial or ethnic group in the country – rather than purely from per-capita increases alone.
Conversely, had the surging growth in population not been taken into account, the Reserve states that the Hispanic wealth share in 2025 would only range between 2.0 percent or 2.4 percent of total wealth – just a minor decrease or increase from the 2010 share.
“[As Hispanic] families grow, and I think this has been the history of other groups as well (…) wealth increases then educational attainment increases, incomes increase and that provides an opportunity to have more diversified assets and to rely less on borrowing.” Emmons told FNL.
“It’s certainly something that we should hope happens and work toward making it happen,” he said.