In a blog post yesterday, we discussed four reasons behind the low homeownership rate of Black college graduates, including the relatively low wealth of their parents. The post includes a graph showing that the average parental wealth of white college graduates, at $1,159,312, is almost 10 times as large as the average parental wealth of Black college graduates, at $123,927.
After publication, some readers noted that the average wealth for Black parents of $123,927 was higher than numbers they had seen previously on Black wealth. There is a good explanation for this. We used average wealth in our calculations from the Panel Study of Income Dynamics (PSID), rather than median wealth from the Survey of Consumer Finances (SCF), which is the more commonly used data source.
We used PSID data for this analysis because it offers a more consistent set of data for a longitudinal review, which we wanted to do. We also preferred PSID data for this exercise because the SCF oversamples households who are likely to be wealthier, while the PSID oversamples the lower-income population.
The large difference between average and median wealth exists because a small number of extremely wealthy individuals increases the average value. But the conclusion that white parental wealth is about 10 times higher than Black parental wealth is true whether one uses an average or a median value. The median parental wealth of white college graduates, at $484,387, is a little more than 10 times higher than the $45,296 median wealth of parents of Black college graduates.
For all four groups (shown in the the figure below), the average parental wealth exceeds the median parental wealth. This suggests that, even among children with similar educational attainment, there is noticeable inequality in parental wealth.
The bottom line is, however you measure it, the enormous parental wealth gap has a big impact on the ability of Black college graduates to become young homeowners. We hope this additional context helps increase understanding of how the racial wealth gap affects persistent gaps in homeownership.
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The Urban Institute podcast, Evidence in Action, inspires changemakers to lead with evidence and act with equity. Co-hosted by Urban President Sarah Rosen Wartell and Executive Vice President Kimberlyn Leary, every episode features in-depth discussions with experts and leaders on topics ranging from how to advance equity, to designing innovative solutions that achieve community impact, to what it means to practice evidence-based leadership.