3. Large Portfolio Concentrations in Housing before the Crash
Housing represented a relatively large share of total assets among economically vulnerable groups (Figures 2 and 3). Figure 2 shows the average share of total assets held in the form of residential real estate in 2007 by each of the nine white and Asian subgroups; Figure 3 shows the same information for the nine subgroups of blacks and Hispanics.
Among white and Asian families, the pattern of asset concentration in housing along both age and educational-attainment dimensions is remarkably clear. The younger the family and the lower the level of educational attainment—that is, the more economically vulnerable the family—the higher its average housing concentration. The difference in housing portfolio shares between the economically strongest subgroup (older college-educated families) and the economically weakest (younger high school dropouts) is an enormous 41 percentage points, making the latter group much more vulnerable to a housing-market decline. The high average real-estate share in total assets among all white and Asian high school dropouts as a group is even more striking when considering that the homeownership rate is relatively low in this group—52 percent in 2007 vs. 90 percent among older college grads. Said differently, if younger high school dropouts have any assets of significance, they are likely to be in the form of a house.
The age-education pattern for blacks and Hispanics is very similar to that for whites and Asians, albeit at uniformly higher levels (Figure 3). With a few slight exceptions, the general principles enunciated earlier hold here, too. The younger and the less-educated the family, the higher the average portfolio concentration in housing. The very low level of homeownership in 2007 among younger high school dropouts, 24 percent, makes the group's 86 percent housing share of total assets all the more remarkable. Comparing Figures 2 and 3, it is clear that the third dimension of economic vulnerability—belonging to a historically disadvantaged minority group—also was strongly predictive of a relatively high exposure to housing risk.
Residential Real-Estate Portfolio Shares in 2007 among Whites and Asians
SOURCE: Fed's Survey of Consumer Finances, 2007.
Residential Real-Estate Portfolio Shares in 2007 among African-Americans and Hispanics
SOURCE: Fed's Survey of Consumer Finances, 2007
assets: Tangible or intangible property owned by a family. Tangible assets include household durable goods, such as automobiles and home furnishings, and real estate, including a primary residence, vacation residences and investment real estate. Intangible assets include financial assets such as bank deposits, bonds, stocks, mutual funds, the cash value of life insurance and pension entitlements (although not anticipated Social Security benefits, which are not legally owned by the beneficiary). [back to text]
family: We follow the definition of “family” used by Bricker et al. in discussing the Federal Reserve’s Survey of Consumer Finances. (See “household,” too.) A household unit is divided into a “primary economic unit” (PEU)—the family—and everyone else in the household. The PEU (family) is intended to be the economically dominant single person or couple (whether married or living together as partners) and all other persons in the household who are financially interdependent with that economically dominant person or couple. Because the definitions of family and household are very similar, we use the terms interchangeably in the text.
Family head: The head of the primary economic unit (PEU) or family. (See definition of “family.”) Designation of a family head is not meant to convey a judgment about how an individual family is structured but as a means of organizing the data consistently. If a couple is economically dominant in the PEU, the head is the male in a mixed-sex couple or the older person in a same-sex couple. If a single person is economically dominant, that person is designated as the family head. [back to text]