REAL ESTATE NEWS

One in four American households lives paycheck to paycheck, though data suggests the growth of this group is slowing, now at roughly one-third of last year’s pace.

Bank of America estimates the share of households living paycheck to paycheck using internal consumer deposit and spending data, evaluating the share of income devoted to essential expenses such as housing, gas, groceries, utilities, internet, public transportation and childcare. Households that spend more than 95% of their income on these necessities are considered to be living paycheck to paycheck.

The analysis shows that 24% of households meet this threshold, up 0.3 percentage points from 2024. When the threshold is lowered to 90%, a similar share still qualifies, suggesting that while more families are feeling financial strain, the rate of growth in their numbers has begun to slow.

Inflation remains a key driver of financial stress and has been rising faster than after-tax wages for middle- and lower-income families since the beginning of the year. Annual inflation is holding near 3%, while wages have increased just 2% for middle-income households and 1% for lower-income households as of October. In contrast, wage growth among higher-income households is accelerating, widening the gap between income groups.

The number of lower-income households—especially Millennials and Gen X—living paycheck to paycheck continues to rise, while the share of middle- and higher-income households in the same position has remained stable. Meanwhile, the proportion of Gen Z and Traditionalist households living paycheck to paycheck has barely changed.

Higher-income Millennials have seen wage growth outpace that of lower-income Millennials by five percentage points. Among Gen X, higher earners have surpassed their lower-income peers by four percentage points. Higher-income Baby Boomers have also experienced wage gains, while lower-income Boomers have seen wage declines. These disparities mean higher-income households are better positioned to absorb the recent reacceleration in inflation, supported both by stronger wage growth and potential wealth effects from greater ownership of assets such as stocks and homes.

Regionally, the share of households living paycheck to paycheck has declined across much of the South and West, though renewed cost pressures could threaten that progress. States in the South—such as Delaware, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia and West Virginia—as well as Western states including Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming have some of the highest concentrations of households living paycheck to paycheck. The lowest shares are found in the Northeast, notably New Jersey, New York and Pennsylvania, and the Midwest, including Illinois, Indiana, Michigan, Ohio and Wisconsin.

The South and West posted some of the lowest inflation rates in the country last year, easing financial strain for many households. However, inflation has recently begun to accelerate in these regions, particularly in the Mountain states. The report notes rising costs may renew or expand financial pressure on consumers in these areas after a brief respite.

Source: GlobeSt/ALM