Black wealth increases; yet lags

[TonyB06]

October 29, 2003

Black Americans' Wealth Increases, But Still Lags

WASHINGTON (Reuters) - Black Americans have narrowed the "wealth gap" with the rest of the country though they still lagged far behind the nationwide average, according to a study released Wednesday.

Boosted by a rising rate of home ownership, the net wealth of the typical African-American household increased from $5,919 in 1989 to $19,010 in 2001, according to Federal Reserve (news - web sites) data analyzed by the Consumer Federation of America, a nonprofit advocacy group.

That increase of 221 percent far outstrips the 33 percent increase posted by all U.S. households during the same period, the Consumer Federation noted.

But black households still lagged far behind the nationwide median average of $86,100 in 2001, the group said.

Despite the persistent gap in net wealth -- defined as financial and property assets minus mortgages and other debts -- the increase is significant as it shows that more black families are following good financial habits, said Stephen Brobeck, executive director of the Consumer Federation.

"We do not believe that a greater than 200 percent increase in black families' wealth is trivial," Brobeck said.

Much of that increase in wealth was due to a rise in home ownership, which increased from 42 percent in 1990 to 48 percent in 2003, said Vada Hill, chief marketing officer of Fannie Mae, the giant mortgage-finance company.

The nationwide home-ownership rate is 68 percent.

Home ownership is especially important because on the whole, black families have had lower incomes and smaller inheritances with which to build wealth, Brobeck and Hill said, and tend to invest less in the financial markets.

"This is an audience that is pretty conservative about investment, pretty risk averse," Hill said.