All Things Real Estate: Middle class faces challenging housing market

Philip A Raices

Over the last number of years since the bottoming out of housing prices in 2011 and the impact of the Covid-19 pandemic coming onshore in the U.S., things have looked up in the market.

Prior to the pandemic, the market seemed to be cooling a bit and then the outlook changed quite rapidly overnight as people migrated away from large city populations and demand for housing totally outstripped available inventory. More important, the vast majority of builders didn’t want to get caught again in another potential downturn,  so construction decreased severely from 2008 and 2015.

At the same time able purchasers continued coming into the market every year during that time period. By the time new permits were issued and construction began, there was
a substantial lack of inventory and it became apparent that demand was reducing the number of homes that were available.

Today, the middle class has been described as 52 percent of the population by the
Pew Research Center. Others describe it differently, ranging from
household income to aspirational goals. Defining the middle class today can
be very challenging and complicated depending on what
variables you might use.

However, how far your money goes will depend on where you live in the U.S. and how you spend and save. If you live locally on Long Island, you can best be described as middle class, but it also depends on what towns and zip codes which can be determinants, too.

The middle class is being squeezed and some feel they are being pushed down to a lower level and the pandemic has been a contributing factor.

Jeffrey Wenger, senior policy researcher at the Rand Corp., says all kinds of factors are part of the equation in determining middle class status: “It’s a sense of security…It’s a certain amount of income… It’s a certain amount of human capital…It’s a certain amount
of community involvement and engagement.” According to his estimates, as of
2020, annual income for the middle class has ranged from a low of $26,900 for single person to a high of $71,900, while income for a family of five has ranged from $60,290 to a high of $160,788.

However, based on the census of 2020, which was very difficult in ascertaining due to the pandemic, Rakesh Kochhar, senior researcher at the Pew Research Center, middle-class income lies more between $51,200-$153,000. This number might have been lower if more people of color were counted, but Covid-19 reduced the number of families that went uncounted.

What is hurting many Gen Z members and millennials who might have been middle class are their exorbitant student loans. Unfortunately, this has caused those individuals over the years to either very slowly pay down the loans or not pay them at all due to the pandemic, which has reduced their wealth and put home ownership out of reach. If this is the future “supposed middle class,” then it is slowly but surely disappearing.

A Sept. 27,2018, article by Homi Kharas and Kristofer Hamel of the Brookings Institution about the middle class and the wealthy calculated that the middle class represented more than 50 percent of the global population and the other half were vulnerable or poor.

The article was very lengthy in explaining their methods of determining how they came to their answers. They did say and project that almost nine out of 10 of the next billion middle-class consumers will be Asian spread around the globe through 2030.

But it appears that more will reside outside the U.S. (China’s middle class is approximately 707 million). The middle class is the most crucial and largest segment of demand in the global economy.

As housing costs have been escalating at a faster pace than salaries and
wages student loans remain burdensome, many will never be in a position to buy unless they can get themselves out of their overwhelming cycle of debt.

How we define “middle class” in the future will be even more challenging as
many more will no longer be considered belonging to that group. Future incomes will define who belongs in which labeled group.

If home prices don’t adjust downward in the future and greater supplies of reasonable housing aren’t built, then affordability for those considered middle class will not exist. The government will need to step in to provide greater assistance with grants and programs.

But with the historic printing of money today will there be any available in the federal budget to be able to consider such programs? Making it too easy to purchase for those who don’t fit the profile with sufficient consistent income and creditworthiness will only cause us to repeat the easy lending mistakes made back in 2000s. The middle class in the U.S. is declining based on current trends and will continue to going forward.

Unless wages and salaries catch up to the cost of purchasing, or higher paying positions come about or greater educational opportunities are created, there will most likely be the “haves” and a greater percentage of “have-nots” outside the middle class. They will be destined to be permanent renters and never experience becoming homeowners.

Here is a link to an article from The Rand Blog on 5/14/21 about the future of the middle class:

Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Ste
180, Great Neck. He has 40 years of experience in the Real Estate industry and has earned designations as a Graduate of the Realtor Institute (G.R.I.) and also as a Certified International Property Specialist (C.I.P.S). For a “FREE” 15 minute consultation, a value analysis of your home, or to answer any of your questions or concerns he can be reached by cell: (516) 647-4289 or by email:

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