Dive Brief:
- A recent Gallup poll revealed the breakdown of how U.S. citizens identify their social class has reverted to what it was before the recession. Two percent said they are part of the upper class, 62% to the upper-middle or middle classes and 36% identify as working or lower class.
- Of the five class categories Gallup asked people to put themselves in, upper, upper-middle, middle, working or lower class, middle class rated the highest at 44%.
- Age plays a part in how people identify their social standing. Almost 50% of young Americans (18-29) declared themselves as working or lower class. Meanwhile, 77% of Americans who are 65 or older were more likely to identify as upper middle or middle class.
Dive Insight:
The middle class might be seeing a resurgence as more people say that’s the social class they belong to, but true indicators of social standing could come down to salary and how much they will have to pay in taxes.
Homeowners who earn between $50,000 and $200,000 could be pegged as middle class by new federal tax reform proposals. The proposed tax plans could raise middle class homeowners' taxes by $815. These potential hikes could lead to a decrease in home values by more than 10%. The tax plan would also increase the standard deduction from $12,700 to $24,000.
This move would not only decrease the amount of people who could claim the deduction, but it would also make it more difficult for first-time buyers to purchase a home because they will need to bigger loan to be eligible for the deduction.
A growing middle class could also dictate where more homes are sold, as affordability would become more of an issue. As inventory becomes scarcer and prices rise, aspiring middle class homebuyers may have to forgo buying homes in bigger cities, especially on the coasts. In 2012, 44% of median income households in the 30-largest metro areas could 44% of the homes there while only 32% could in 2016, according to Redfin.
This might lead to a spike in sales in more affordable areas as the gap between the median household income and the increase of home prices (1.6% and 26%, respectively since 2012) continues to get wider.