Phoenix/ Real Estate & Development
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Published on February 28, 2024
Middle Class on the Brink, American Dream Slips as Housing and Inflation Pinch IntensifiesSource: Unsplash/ Breno Assis

The economic squeeze tightening around the American middle class shows no sign of abating, as an observed shrinkage of this demographic has experts raising alarms over the sustainability of the economy's backbone. Jim Rounds, a Valley economist from Rounds Consulting Group, highlighted the pressure cooker situation, painting a stark picture of the current financial landscape for the average household aspiring to achieve a middle-class status. According to data he shared on ABC15, couples in Arizona are facing a steep climb, with 1.5 earners per household needing salaries of around $75,000 each to meet the rising bar of middle-class comforts.

Peering through the lens of median household incomes, the figures do not inspire confidence. Most Arizonan households, afflicted by economic headwinds, are grappling with incomes that do not reach the aforementioned threshold. To emphasize, putting a spotlight on the graveness of this issue, the median household income in Arizona scarcely hit $72,581 from 2018-2022, per U.S. Census data reported by ABC15. This worrying trend is not just a local anomaly; it reflects a national slide where the Pew Research Center data asserts a drop from 61% of adults in middle-income households in 1971 to 50% in 2021, indicating an ongoing thinning of the middle-class ranks.

The cornerstone of the American dream, homeownership, remains elusive for many in this bracket, weighed down by the tangible realities of the market. "We have to build more affordable homes," Rounds asserted in a statement, according to a KTAR interview. Questions about middle-class Americans' capability to afford homes are becoming increasingly pressing as inflation looms, currently around 3%, but with the potential to deliver a more stinging impact due to a phenomenon Rounds describes as the "sticky up" effect.

Price fluctuations tend to rapidly recover when the economy dips, but stubbornly persist when inflation thrusts them upward. "When you have prices declining, they jump back up really quick when the economy changes. They don’t come down that quickly," Rounds elucidated on the subject while discussing how the high price of gas once mirrored this pattern. The burden of this trend is not just limited to the gas pumps; many Americans are contending with inflated prices for essentials from food to services, seasoned by a market waiting for consumer resistance to bring about a re-adjustment – an adjustment that may potentially pivot the direction of the housing sector's high costs. "Housing is very expensive and that’s something that we have to work on across the nation," he mentioned to  KTAR, signals a complex interplay of economic forces, consumer behavior, and policy interventions that likely will shape the future affordability of the American middle class.

Phoenix-Real Estate & Development