DemographicsConsumer and Home Design Trends

What the Shrinking Middle Class Means for Housing

Chris Porter photo
Mikaela Arroyo photo
John Burns photo

Chris Porter

Mikaela Arroyo

John Burns

May 3, 2018

The widening gap in income distribution trends in the US has significant implications for home buying activity and homeownership. The shrinking size of the American middle class (those who make between two-thirds and double the median US household income*) has resulted in:

  • More rental demand

  • More demand for homes at the highest and lowest price points

  • Less demand for median-priced homes

Among households headed by those under age 65, middle-income households plunged from 57% of American households in 1970 to only 45% today—a decline of 12%. (Though today’s 45% is up slightly from an average of 43% over the previous seven years.) The result has been a:

  • 7% increase in the percentage of households who earn more than double the US median income, from 12% in 1970 to 19% in 2016

  • 4% increase in the percentage of households who earn less than 80% of the US median income, from 31% in 1970 to 35% in 2016.

What do these income trends mean for housing?

  • More rental demand and downward pressure on homeownership. With 35% of working-age households earning less than 2/3 of the US median income, compared to 31% in 1970, a lower percentage of households are able to qualify to purchase a home, and thus more will rent.

  • More demand for lower-priced homes. The lowest-priced homes in the market have even more demand. In most markets, the months of supply and days on market of the lowest-priced homes are extremely low.

  • Less demand for median-priced homes. The shrinking middle class (down 12% in share of households and 22% in share of aggregate income) creates less demand in the middle of the market.

  • More high-end home demand. With a larger share of households having more than double the median income and a rising share who are buying later in life due to delays in marriage and having children, a rising percentage of households are buying a more expensive than usual first-time home. In our experience, this isn’t showing up in the very highest price points, but rather for homes priced up to 50% higher than the median home price in a market. Home builders in particular have benefited from this demand, selling higher-density new homes in great locations to first-time buyers.

To learn more about wealth trends for each generation, check out our book Big Shifts Ahead: Demographic Clarity for Businesses or contact Chris Porter.

* Defined by the Pew Research Center to be households who earn between two-thirds and twice the US median household income, including an adjustment for household size. We excluded households headed by those over the age of 65 and included only wage and salary income, which accounts for 90%+/- of total household income.

Building Market Intelligence™

Every week, we deliver analysis to over 40,000 subscribers with our Building Market Intelligence™ newsletter. Subscribe to our weekly BMI newsletters to stay current on pressing topics in the housing industry.

About The Author

Chris Porter photo
Chris Porter
Senior Vice President, Chief Demographer
Chris brings clarity to JBREC’s clients on demographic trends and translates their impact on local housing markets. He also analyzes and compares local housing market metrics in JBREC’s Metro Analysis and Forecast and Regional Analysis and Forecast monthly reports.
Mikaela Arroyo photo
Mikaela Arroyo
Vice President, NHTI | Chief of Staff
Mikaela leads trend research for the New Home Trends Institute, conducting monthly surveys of consumers and industry professionals to better understand housing pain points and desires. As Chief of Staff to the CEO, Mikaela strategizes and supports the daily operations of the company, focusing on business initiatives.
John Burns photo
John Burns
Chief Executive Officer
As CEO, John grows, leads, and supports a team of passionate, articulate, likable, and smart experts. Together, we solve today so our clients can navigate to tomorrow.

Contact Us

If you have any questions about our services or if you would like to speak to one of our experts about we can help your business, please contact Client Relations at

Products and Services Mentioned

green check icon

Real Estate Consulting

Our experienced team of consultants helps clients make sound housing investment decisions. We thrive on their success and work with many clients over multiple years and numerous projects.
green check icon

New Home Trends Institute

The New Home Trends Institute pairs design inspiration with exclusive insights into the “why” behind consumers’ housing choices. Gain exclusive insight into housing preferences and pain points through our monthly survey insights reports, webinars, and proprietary surveys of builders, architects, designers, and other industry professionals.
green check icon

Proprietary Surveys

Our family of proprietary surveys provide clients with irreplaceable insights to support their housing-related business decisions. The analysis combines survey data and the harder to obtain sentiment to deliver a cohesive view of market conditions.

Latest Insights

Higher-for-Longer Rates Spook CRE Investors, per the Burns + CRE Daily Fear and Greed Index
1Q24 Kitchen and Bath Insights: Middle-Market Malaise; Luxury-Market Strength
Charting a 22-year roller coaster of investor activity