Helene Pearson's belief in homeownership was shattered in Roseland, the mostly black Chicago neighborhood where President Barack Obama got his start as a community organizer.
Pearson, who bought her two-bedroom, red-brick bungalow on South Calumet Avenue in Roseland for $160,000 in 2006 with a high-interest loan, put it on the market a year ago for $55,000 and didn't attract a single offer. Her bank has agreed to take it back.
"I was so excited to buy my first house right down the street from my mother but they got me good," said Pearson, a 35-year-old guidance counselor and mother of two girls. "This scarred me so badly that I never want to buy again."
For most Americans, the real estate crash is finally behind them and personal wealth is back where it was in the boom. For blacks in the U.S., 18 years of economic progress has vanished, with a rebound in housing slipping further out of reach and the unemployment rate almost twice that of whites. The homeownership rate for blacks fell from 50 percent during the housing bubble to 43 percent in the second quarter, the lowest since 1995. The rate for whites stopped falling two years ago, settling at about 73 percent, only 3 percentage points below the 2004 peak, according to the Census Bureau.
When Obama, the country's first black president, took office in 2009, he inherited an economic and housing crisis that disproportionately affected minorities. In a speech last week on the 50th anniversary of Martin Luther King Jr.'s March on Washington, he called for expanding King's dream of racial equality to include economic opportunity for all.
"Dr. King explained that the goals of African-Americans were identical to working people of all races: decent wages, fair working conditions, livable housing, old age security, health and welfare measures -- conditions in which families can grow, have education for their children and respect in the community," Obama said at the Lincoln Memorial in Washington.
In Roseland, among the hardest hit neighborhoods in the country during the housing bust, many of the causes of the crash and obstacles to rebuilding black homeownership are found, according to Spencer Cowan, vice president of research at Woodstock Institute, a Chicago-based nonprofit group that researches fair lending, foreclosures and wealth creation.
Almost 40 percent of borrowers there took out high-cost loans in 2005 and 2006 as mortgage lenders backed by Wall Street targeted minority home buyers across the country for loans that required lower credit scores, reduced down payments, or featured interest rates that would start low and rise over time, contributing to an unsustainable bubble that popped when defaults rose and they cut off lending.
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SOURCE: Bloomberg Businessweek