Check out the chart at the link. Nearly half of working people earn less than $ 30,000. As I read this article, I couldn't help but to think about how many people I went through to fill a vacancy for a one bedroom costing $ 800 a month. Most of the folks didn't qualify due to income and the income requirement was around $ 32,000. Most folks were making just under that at $ 25,000 to $ 28,000 and I had to turn them away.

I just think this has broad implications for rentals, rent levels, auto sales and pretty much everything else one can think of. In many areas across the country, there's been a run up in rent and real estate prices, but there's a hard limit on the rent people can afford and I just think that there's a possibility rents are going to be dropping over the next several months.

The article makes the point that these are where the numbers are at given a recovery and "full employment", so in a downturn they'd deteriorate. I've been looking at unloading my fourplex to reduce leverage and fund my other projects and this tends to support the idea of selling. Check it out.

howmuch.net/articles/how-much-americans-make-in-wages

This is the reason my places are not at so-called "Market Rent" if by market rent you mean the hoped-for rents listed on Craig's List, FB and other sites.

The $1500-$2000-$2500 rents are just not realistic given the income levels of the people who live here. If they can afford that kind of rent they will buy.

In the meantime those places languish empty and mine stay full. And I still reject 99% of inquiries for lack of income so I *know* I can't raise my rents much higher.

I sometimes feel like "one who FLEW over the cuckoo's nest".

When looking over an app-- for me anyway-- the "YOU NEED 3 TIMES THE RENTAL AMOUNT" is just words that flow. A starting point to start weeding. We don't (make that I don't) really care about income. THE JOB is of utmost #1 importance. How long they been there-- how's the bennies there and could they (really would they) go somewhere else to avoid garnishment?

Lower income-- boost deposit. I know some can't do that due to state laws-- but -- I believe I would find a way.

People want clean homes-- if you make yours out of reach to them-- they want it even more.

Your probably thinking here it goes again--- but really your not going to keep places full-- ours is a .3% vacancy factor (3 days) if you don't come u with options for yourself. Stop looking for that "PERFECT TENANT". Look at the perfect job they have.

When we took over our own collecting ( we had a local guy doing it for several years) we had maybe 375K out there. Big numbers-- but the collection company was going after small amount from Dr.s etc. When it came time to verify debt we were having to go to court ourselves anyway-- then we find he had collected money and not turned it over to us???

OH my GOD! 100% absolute---- yes.

Interesting article. A few questions, some thoughts, and finally some data to share.

1) Wages, wages, wages....does this data include income for small business owners?

2) Does the data include income from rents, royalties, dividends, pensions, retirement account distributions, etc? I doubt it, since data was all from Social Security Admin, and those form of income do NOT get taxes by Social Security.

3) Read this quote from the article carefully: "There is one important caveat to keep in mind when thinking about our data set. The SSA numbers include any wage earners whatsoever, even part-time workers like students and teenagers. If the worker reports his or her income to the IRS on a W2 form, he or she is included in these stats. This drags down the aggregate wage numbers for full-time working adults, which reach $61,372 for households last year."

So, basically if you take out the part-time students and stay-at-home moms (like my wife) who go in for 10 hours a week just to have a social life and earn some fun money....the "average income" about doubles.

4) Two $30K incomes = $60K, which in many areas of the country will buy a respectable house and 2 cars in the driveway with all the other accouterments of "modern middle class living" one usually thinks of.

5) Data from Pew Research and US Census Bureau does show the middle class disappearing, but that is because a slight majority of household are moving into the Upper Middle and Upper class vs. Lower Class. This article title sounds like Gloom and Doom. Where is the reporting on the positive side? My guess: "If it bleeds it leads..."

Sources:

* informationstation.org/kitchen_table_econ/wheres-the-middle-class-going-up/

* pewresearch.org/fact-tank/2018/09/06/the-american-middle-class-is-stable-in-size-but-losing-ground-financially-to-upper-income-families/

And to think with just a little more effort than the next guy, almost any of us can buy a house and sell it in a short time and make 30 grand. We can repeat that as many times as we can find houses.

The difference? Nobody will put out the effort. NOBODY!

Sid, to answer some of your questions:

1. The data is from IRS W-2 reporting. So, it would include small business owners that pay themselves normally and file a W-2 for that income.

2. No, it does not include those because they are not reported as W-2 income.

3. Actually, you (and the article), mix things a little oddly in that statement. All of the numbers in the article are for individuals. But that $61,372 average is for HOUSEHOLDS -- so many of those would be from more than one individual. So, it doesn't really double the average income when you remove those lower-end people based on the numbers that they gave. One (~$30k) is talking about individuals and the other ($61,372) is talking about household income. (Also, it looks like the numbers on this article are AFTER taxes, but the household average that they mentioned is GROSS income.)

- John...

Here is a test that we should all apply to the article: In my locale it costs $_______ per hour to hire and RETAIN a sober, reliable, person with a good work ethic whose skill set is at the midrange of jobs in my area.

John...

Thanks for the clarification on item 1. I missed this line's significance on the first read: "If the worker reports his or her income to the IRS on a W2 form, he or she is included in these stats. "

Yep, so that would include small business owners. I was distracted by the repeat use of "wages", which is not used frequently with small business owners. At least, not the ones I talk to. Owner's draw / profit is more common in my parlance.

I pretty well knew the answer to #2. Mostly rhetorical.

Amended thoughts on #3 accepted. That said, a follow up thought: there are more single households now than ever before. Is is the average income that's the problem, or the fact that younger folks are less likely to form households than in the past?

Also interested in your thoughts on the overall theme of the article? The way I read it, they're trying to prove the Middle Class is worse off today and continuing to slide down, whereas the information I find says it's holding it's own and getting (a little) better.

I have the same experience as WMH. I have to advertise $100 lower rents than zillow rent estimate and comparable listings, in order to get them rented to quality applicants.

I'm not offering cheaper rent on the same house, though, David. We found that most people in our target couldn't AFFORD a 3/2 house, so we down-sized and now only rent tiny/small/medium houses. So we are able to offer a place to live (clean, safe, cute) from anywhere from $725 for a studio to $1250 for a 2/2. None are 3/2's, and most are either duplexes or tiny cottages.

This is why I LOVE my market segment: Class C 2-bed homes here rent between $450 for real small up to $650 for nicely renovated places.

Even at the top end $650 * 3 (income rule minimum 3x monthly rent) we're only talking $1,950. A person working an $11/hour job would qualify. And that's for a NICE house. My little $550 - $600 houses don't require even that level.

So if you're willing to work as a Wal-Mart checker, you can make enough to qualify for a very nice 2-bed unit. It's so cheap there's no reason NOT to quality.

I had a gal submit a Showing form today that said income between $900 - $1200. Too low for even my cheapest vacancy, but on a lark I called back and asked why the variation. "Oh I don't always get the same number of hours."

"Hey, ever think about a second job?" No I didn't say that. Just let her know she was a few hours per week short of our minimum qualification even on the high side.

G,

Reinforces my slogan - people don't have money.

Recent rent increases (wonderful!!) have shift the chart and the same people cannot longer afford that home.

So I must appeal to the next level of shopper.

PS We rent to a handful of WalMart workers. Our town has 2 super WalMarts and a Sam's Club so they are a major local employer.

WHen WalMArt cut back hours to avoid paying for medical I don't recall ANY of our residents getting a second job to help make ends meet. If you are only working 30 hours a week you definitely have time to take on a second job, even 30 hours.

Help wanted signs are EVERYWHERE in my town.

BRAD

Sid: As for the article itself, yes, I think they are trying to say that things are worse off -- basically that the Middle Class is shrinking. I actually tend to agree with that -- but it is hard to really confirm either way because, as we said above, it's very easy to have LOTS of "conflicting" statistics because people tend to use stats how they want to show what they want. :)

- John...

Oh -- and I'm right with you, Sid (and ned). Our "market segment" is pretty much the same. We have exclusively 2BR/1BA units that rent to "Class C" people. They range from $485/month in our smaller town 4-plexes (near where I live) to $650/month in our college town SFHs (near where I work).

That being said, I don't consider those "middle class" at the low-end, at least. The people filling our <$500/month places are mostly at the $30k/year or less for their HOUSEHOLD level.

The ones in our SFHs at $600+/month tend to be approaching middle class but are usually a bit early in their careers to really hit that level.

- John...

I maintain that the major implication here is for real estate valuations. There's been a huge run up in MFH many of which are valued based on NOI. If rent levels have hit a wall, are the valuations justified? Many people have bought anticipating more rent perhaps thinking every place is going to gentrify. There's a limit to how much folks can pay and the number of high end folks is shrinking. Most of these high end folks are head over heels in debt and consume like there's no tomorrow anyway. No one has any money and that includes those on high end as well.

GKARL,

I think you are correct to apoint on the limits of high end folks, but consider the rise in the number of single person households.

Both my SIL and MIL own their own 3-bed, 2-bath 2 car garage houses. They're both single women and no foreseeable marriage, children, or roommates joining them any time soon.

I think there's a lot more "capacity" out there among the (relatively) high end folks if they'd stop insisting everyone needs their own 1500 sq foot space. My family actually is more efficient than theirs by any measure. Our house is 3400 sq ft, but we house 5 humans. 680 sq per person vs. 1500.

Also, as the links I provided above shows, middle class IS shrinking, but more are move UP than are moving DOWN. People are more willing to spend oodles on RENT today than before, preferring to live in trendy, hip places and pick up and move at the drop of a hat vs. tie down to a house for 10+ years.