Whites now 20 times as wealthy as blacks, Hispanics lose 2/3rds of their wealth

[Berkut]

And almost everybody in the middle and lower classes net worth IS in their real estate property.

Which is pretty terrible, if you think about it.  One shouldn't have all their eggs in one basket.

Of course, net worth is not a very good measure of wealth in itself.  It rarely accounts for income streams, whether fully guaranteed like pensions, or reasonably guaranteed like career income.

Indeed. And while "whites have 18 times the net median wealth as blacks!" makes for some juicy headlines, the reality is that the much bigger story is not that one group of median income people have a lot more as a multiple of another, it is that neither group has much of anything compared to the people with real net worth. $100k net worth is nothing, really. It won't protect you from anything, and won't make any significant difference to you compared to $20k net worth. It is just an indicator that you are middle class instead of lower class.

The real story is that even the middle class lost a significant chunk of their net worth, while the upper class...did they lose any to speak of?

[Richard Hakluyt]

It's quite possible that, say, 60% of whites own a property and only 40% of black people. If that was the case then selecting the 50th centile for net worth would be a great way of grossly exaggerating racial differences in wealth.

[grumbler]

Ok so by renting you get better mobility - which should translate into better profit.

Not sure what "profit" means here.  Higher wage?  Possibly.

The bottom line is this - assuming economical behavior of market actors, two families starting with equal capital, one of which one buys a real property with a mortgage and another one rents, should (subject to fluctuations of the market and relative profitability of real estate vs. other forms of investment) at the end of any period have broadly equal net worth.

Not at all true.  The home buyer is going to increase net worth more than the renter, all other things being equal, because total cost to rent > total cost to own (else no one would rent out properties).  The reason why people rent rather than buy is because of the high transaction cost to buy and sell a house.  Unless you know that you will be in a location for long enough to recoup those costs in increased home sales value, you rent.

So, you can't explain the vast differences shown in the study by home ownership vs. renting,

So, actually, you can.

[Berkut]

It's quite possible that, say, 60% of whites own a property and only 40% of black people. If that was the case then selecting the 50th centile for net worth would be a great way of grossly exaggerating racial differences in wealth.

Surely nobody would ever do such a thing!

[Valmy]

A report by the Pew Research Center finds that white households' average wealth is 20 times that of black households and 18 times that of Hispanic households - the largest such gap in 25 years when records began- and roughly twice the ratios that had prevailed between these three groups for the two decades prior to the Great Recession that ended in 2009.

Aside from being terrible results in their own right, this is bad, bad, bad for social cohesion.

Wait what?  The text you quoted claims that the average white family has 20 times the value of an average black family but that is not what the graph is showing.  These are the median families.  Meh.

No wonder I was initially confused.

[grumbler]

Wait what?  The text you quoted claims that the average white family has 20 times the value of an average black family but that is not what the graph is showing.  These are the median families.  Meh.

No wonder I was initially confused.

He doesn't even provide a link, so I am questioning the validity of this whole thing.  If you google his quote, the only hit is his post.

[PDH]

That Pew research stinks.

[Martinus]

The renters almost certainly earn less.

Buying is generally more long term advnatageous than renting, which is why most people who can buy do so. But to get a mortgage* you need a decent income, steady job, and good credit. Something many lower income households do not have, hence their lower net wealth.

*At least in theory, Barney Frank not withstanding.

Ok, so saying that the wealth differences are due to home ownership rates is a bit disingenious. It's like saying that flying in a private jet makes you richer than flying economy class.

[DGuller]

The renters almost certainly earn less.

Buying is generally more long term advnatageous than renting, which is why most people who can buy do so. But to get a mortgage* you need a decent income, steady job, and good credit. Something many lower income households do not have, hence their lower net wealth.

*At least in theory, Barney Frank not withstanding.

Ok, so saying that the wealth differences are due to home ownership rates is a bit disingenious. It's like saying that flying in a private jet makes you richer than flying economy class.

Saved for posterity.

[The Brain]

lol posterity

[MadImmortalMan]

There are the other reasons people rent. Not having to be responsible for maintenance and upkeep, maintaining geographical mobility, living in a place like a major urban center where renting is more convenient, not having property taxes. You pay a premium for that stuff. If you buy, all costs are yours.

[The Brain]

Renters still get to kill trespassers at will?

[Pat]

lol posterity

"Why we should put ourselves out of our way to do anything for posterity, for what has posterity ever done for us?"

[Malthus]

Conversely, if it wasn't true, why would anyone rent?

Because owning ties to one location and owning is a pain.

Ok so by renting you get better mobility - which should translate into better profit.

The bottom line is this - assuming economical behavior of market actors, two families starting with equal capital, one of which one buys a real property with a mortgage and another one rents, should (subject to fluctuations of the market and relative profitability of real estate vs. other forms of investment) at the end of any period have broadly equal net worth.

So, you can't explain the vast differences shown in the study by home ownership vs. renting, unless the renters either earn less or waste their extra money (that they do not invest in real property) on shit, or both.

A mortgage acts as a sort of forced savings. In theory, one could rent for less and put the cash into other investments - but the reality for the average person is that they do not save nearly as much if they are not required to.

This, as much as anything, explains why a mortgage works to build wealth. There is nothing whatsoever stopping someone from setting up an automatic investment paying 40% of their income into equities each and every month or whatever - but very few do that. I do, to an extent - I make automatic monthly withdrawals into savings as well as paying a mortgage.

[Martinus]

lol posterity

"Why we should put ourselves out of our way to do anything for posterity, for what has posterity ever done for us?"

I think he meant posterity means "arse".