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Against the backdrop of persistent racial and ethnic wealth disparities, Latino families have seen some positive signs in the past few years, a new report suggests.
Hispanic households’ wealth — defined by total assets minus total debts — was up by more than 60% from their 2019 level as of the second quarter of 2023, according to an analysis by the Federal Reserve Bank of New York. This growth in wealth was compared with around 40% growth for both Black and non-Hispanic white households between 2019 and the second quarter of 2023, with Black households’ wealth growing slightly faster.
Hispanic families made more progress than other racial and ethnic groups in accumulating wealth during the pandemic due in part to faster growth in homeownership and the fact that many Hispanic Americans are aging into their prime years of hitting financial milestones, experts say. In the meantime, many Hispanic-owned businesses have experienced a strong recovery from the pandemic.
The progress also comes amid an almost unchanged picture of the racial and ethnic wealth gap. Latinos in the U.S. have also traditionally faced barriers to accessing capital and credit.
From the archives (November 2022): U.S. Latinos contributed trillions of dollars to the economy in 2020. So why are they so underserved by financial services?
Some 63.7 million Hispanic people lived in the United States as of July 2022, making up about one-fifth of the total population, according to U.S. Census Bureau data. But Hispanic wealth remained roughly less than 5% of the total U.S. wealth in 2023, New York Fed charts show. The average Hispanic household had a net worth of $61,600 in 2022, according to a separate Federal Reserve report, compared with $285,000 for a typical non-Hispanic white family.
It’s worth noting that Latinos in the U.S. are incredibly diverse — including along the lines of race, geography, socioeconomic status and immigration status — and their financial situations can vary significantly. The New York Fed report defined Hispanic respondents as those who self-reported their ethnicity as Hispanic in the Survey of Consumer Finance.
Here’s a closer look at three key drivers that explain why U.S. Latinos’ wealth has grown over the last few years:
Rising homeownership: 2022 was one of the biggest home-buying years in the past decade for Latinos in the U.S.
Hispanic households saw their nominal real-estate assets grow by 90% between the first quarter of 2019 and the second quarter of 2023, New York Fed data shows. That’s compared with more than 70% growth for Black households and a close to 50% increase for non-Hispanic white households. The report did not include data for Asian or Native American households.
The number of Hispanic-homeowner households increased by about 657,000 between 2019 and 2021, and rose by a net total of 349,000 households in 2022, according to the latest report on Hispanic homeownership by the National Association of Hispanic Real Estate Professionals — making 2022 one of the biggest home-buying years in the past decade for Latinos in the U.S.
High home prices have posed a common barrier for most potential home buyers during the pandemic, but compared with other demographic groups, Hispanic families have been more willing to move across the country to find more affordable housing markets and better job prospects, said Gary Acosta, the co-founder and CEO of NAHREP and founder of the Hispanic Wealth Project, a financial-empowerment nonprofit launched by NAHREP.
Hispanic homeownership is rising in more affordable markets in Texas and in cities such as Des Moines, Iowa; Nashville, Tenn.; and Milwaukee, he said.
Homeownership is a “very high” priority for Latinos, largely because of how family-focused many are, Acosta said. “Home is the center of the family experience,” he said. Referring to the recent 2023 report by Hispanic Wealth Project, Homeownership can also have a significant “multiplier effect” on a person’s wealth, he said.
Compared with members of other groups, Hispanic individuals are also more willing to borrow from other family members, as well as more willing to move into a multigenerational home, Acosta said, especially with many having the issue of securing enough money toward a down payment and getting access to reliable lending.
“You’ll see multigenerational families — a parent, their children and grandchildren — moving together and pooling their resources to buy their first home,” he said.
Hispanics are aging into the prime years of financial progress
Age also plays a part in the relatively fast growth of Hispanic wealth, according to a recent report by the Hispanic Wealth Project and NAHREP. The median age of Hispanic individuals in the U.S. was 30.7 in 2022, according to Census data, making them the youngest racial or ethnic group in the country. The median age of non-Hispanic white individuals was 43.9 in 2022, in comparison. “That’s a big gap,” Acosta said.
As people get older, their wealth statuses tend to improve, he added. Their earnings grow, and the assets they hold — whether real estate or other financial assets such as 401(k) plans — also appreciate and grow in value. This fact played a role in the rise in Hispanic homeownership, Acosta said.
“Hispanics are aging into what we call those ‘prime homebuyer years’ right now,” Acosta said. The most common age range for purchasing a first home is usually in the mid-30s and 40s, he said, “and Hispanics are just sort of entering that as a group.” The typical first-time home buyer is 35 years old, according to the National Association of Realtors’ latest annual survey.
Latino-owned businesses recovered faster from COVID-19’s negative impacts
Latino-owned businesses have recovered from COVID-19’s negative impacts at a faster pace than businesses owned by non-Hispanic white people, according to Stanford University’s Latino Entrepreneurship Initiative, though the pandemic hit Latino-owned businesses much harder.
Some 23% of Hispanic-owned businesses reported they had recovered and were doing better in 2022 than before pandemic, compared with 18% of businesses owned by non-Hispanic white people. From 2019 to 2022, the median revenue growth rate for Latino-owned businesses was 25%, compared with 9% for businesses owned by non-Hispanic white people.
Meanwhile, there’s been an underlying trend over the past two decades of Hispanic- and Latino-owned businesses scaling up, Acosta said. An earlier report by the Stanford Latino Entrepreneurship Initiative found that the number of employees of Latino-owned businesses grew by 55% between 2007 and 2021.
Some one- or two-person businesses have started to expand, Acosta added. “Some of those businesses start to grow and become larger and become an employer, where they actually employ people and start to scale those businesses,” Acosta said. “I think that’s where wealth really gets created.”
