Plan To Bounce From Recession

Let’s say you lost your job during the Great Recession of 2007-2009, lost your home to foreclosure, or wealth flew out of the window; experts say stop brooding, get busy, and make up for lost time.

A growing number of reports show people of color lost more household wealth than whites from 1983 to 2013. Specifically, the average wealth of white households increased by 84 percent during the past three decades, which is three times the increase for African-American families and 1.2 times the rate of growth for Latino families.

The problem is economic conditions streaked downhill for many people of color during the Great Recession of 2007-2009. Housing prices fell 31.8 percent nationwide. Two years after the recession ended, unemployment was still above 9 percent. Banks had allowed people to take out loans for 100 percent or more of the value of their new homes.

The point is some are brooding because people of color will need about 228 years to catch up, according to multiple reports.

I had a 401(k). I had a small pension plan. I had some savings. Now I realize I should have had much more. My financial training is teaching me that there are so many other things that can positively affect your life such as savings, bonds, and annuities. I am becoming more aware, and more educated.”

And this is where the disproportionate number of foreclosures among people of color comes in. A 2015 ACLU report showed that people of color were disproportionately targeted for sub-prime mortgage loans. Overall, Americans lost $192.6 billion through foreclosure, according to a 2013 report by Alliance for a Just Society titled, Wasted Wealth. But the bulk of those foreclosures hit people of color.

“ZIP codes with majority people of color populations saw 17 foreclosures per thousand households with an average of $2,200 in lost wealth per household,” the Wasted Wealth report noted. “In sharp contrast, segregated white communities experienced only 10 foreclosures per thousand households and a wealth loss of $1,300 per household … More than 13 million homes are still underwater and at risk of foreclosure and more lost wealth.”

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But the Great Recession is over – right? Does this mean economic conditions are getting better for people of color?

The New Journal and Guide posed the question to Hampton Roads Realtor Deborah Hunt, who has sold real estate in the area since the 1980s. “When you say getting better it is relative – or compared to what,” Hunt asked.

“I say that because when the economic downturn happened many people lost their jobs,” Hunt said. “Some lost their homes. We’ve always had that disparity there, in other words. For example, when you say the percentage for white unemployment has dropped to 4 or 5 percent, that sounds excellent; but, what they’re not saying is that in the (minority) community, the unemployment level may still be where it was.”

This is the point scores of reports clearly show. Specifically, people of color lost more wealth during the economic downturn. “But when the smoke clears, and the rubber hits the road, are we doing any better?” Hunt asked.

The problem is too many people of color who signed up for sub-prime mortgages were first-time homebuyers. “Because they were first-time homebuyers they had no idea what they were getting into,” Hunt said. “It’s kind of like the first person in the family who goes to college does not know what to expect. So many people were buying a home for the first time. They did not know what to expect. The equity we should have had is no longer there. You have those who were preying on us.”

These days, Hunt said she tends to focus on young, first-time homebuyers because they “are more appreciative,” less discouraged, and more willing to attend first-time home buying classes.

“I help them get access to first-time homebuyer classes that teach them how to own and how to keep a home,” Hunt said. “These classes are offered through Virginia Housing Development Authority, a state sponsored program. The classes teach them know how to get help, and how to reach out if trouble comes. That is the important thing: How do you get and also keep your home? No one is free from the fact that they may find trouble in their way. Circumstances can change for anybody. So knowing what to do is going to be important to a future homeowner.”

To rebuild wealth, consider these tips from McCann, the vice president of Mass Mutual Commonwealth. The key to financial success is to simply stop looking back and look ahead, he said, zeroing on three strategies. First, analyze your cash flow. Second, know where your money is going. Third, reallocate money that is not helping you get ahead.

Finally, save money. “Whether you earn $5000 a year or $5 million, people typically don’t save because they don’t think they can,” McCann said.

If you lost wealth but want to regain it, hire a financial coach, McCann added. “Some people only have about $300 or so left at the end of the month. They decide it will not help them retire so they go out to dinner instead. I am saying identify a goal. The coach will help you get there. A coach reviews your numbers on a routine basis in order to help you reach your goal. My recommended advice is that you start saving.”

By Rosaland Tyler
Associate Editor