Hispanic Population's Share of Wealth Likely to Increase by 2025

ST. LOUIS – Wealth owned by Hispanic families could triple within 10 years if trends observed in the past two decades resume, according to new analysis from the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis.

Hispanics suffered above-average wealth losses during the Great Recession. But the Center’s new analysis, published in the June 2014 issue of In the Balance, estimates that Hispanic wealth is likely to bounce back and grow considerably faster than overall wealth through 2025.

The authors, William Emmons and Bryan Noeth, estimate that Hispanic families will own between $2.5 trillion and $4.4 trillion of wealth in 2025, up from $1.4 trillion in 2010, the latest year for which the demographic breakdown is available. All estimates are adjusted for inflation to be comparable to 2010 figures.

While the majority of the gain will likely be due to faster population growth, a small increase may result from faster growth of average household wealth.

And while the Hispanic share of wealth would remain smaller than that of whites and Asians, the authors estimate that it will likely rise to an all-time high of between 2.6 and 3.2 percent of all wealth, up from 2.2 percent in 2010.

Greater wealth could support higher spending and increased homeownership rates among Hispanic families, who will become an increasingly important part of the U.S. economy in coming decades.

Because the wealth outlook cannot be certain, the authors explore two possible wealth scenarios: one in which Hispanic wealth regains its recession-related losses and reverts to the rapid-growth trends of 1989-2010, and another in which the wealth losses suffered in the recession prove to be permanent in the sense that no catch-up period occurs.

If the first scenario happens and Hispanic wealth regains the footing it lost in the recession, the average level of wealth among Hispanic families would increase from 22 percent of the level among all families in 2010 to 26.5 percent in 2025.

But in either scenario, Hispanic households’ share of wealth is predicted to grow faster than wealth for the rest of the population.

Many Hispanic families were severely affected by the Great Recession because their wealth was highly concentrated in housing and their debt levels were high.

“Increasing wealth over time will allow Hispanic families to diversify their assets and reduce their dependence on borrowing,” Emmons said. “This will increase their financial stability, enhance the economic mobility of their children, and contribute to a growing U.S. economy.”

The publication described here can be accessed at www.stlouisfed.org/publications/itb/.