Despite recent headlines trumpeting a return of America’s real estate market to its boom-time highs, a report released today by the Alliance for a Just Society shows how little of that has trickled into communities of color. The document, entitled “Wasted Wealth,” is a sobering reminder of the gap between top-line economic cheerleading and the reality of what’s happening on the ground.
As “Wasted Wealth” lays out, close to 2.5 million families lost homes in just three years. Communities that were majority people of color saw foreclosures take place at almost twice the rate as white communities, with an average loss of wealth 30 percent higher per household.
This foreclosure tidal wave is why wealth for blacks and Latinos is at the lowest level ever recorded. Housing is the leading wealth asset for these two communities.
Although the real estate market overall has regained $16 trillion in wealth lost during the recession, these gains are largely driven by a frenzy for high-end properties at the very top of the market. “Wasted Wealth” contrasts these highs with the fact that more than 13 million homes continue to remain at risk for foreclosure.
The good news contained in the report is that there is an actual way out of the mess. That’s because the crisis resulted from acts of policy in Washington and not acts of nature. Regulators allowed dodgy loans to be marketed disproportionately to communities of color, which is why these communities continue to suffer disproportionately. Consequently these same regulators can help turn things around. “Wasted Wealth” proposes a way to do just that.
By allowing at-risk homeowners to write down their over-priced mortgages to present-day market values, families could lower their monthly payments and be able to stay in their homes. The report believes that this can save an additional quarter trillion dollars in potential lost wealth and create 1.5 million new jobs.
Let’s hope that someone is listening.