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22 EVOLVING MIDDLE- CLASS HOUSEHOLD DEMOGRAPHICS A report by the Brookings Institute assessed which metropolitan areas are most popular among the middle class, as well as how concentrated middle-class communities are, what forces shape them, and how they've changed since 2000. Defining the middle class as the middle three quintiles of the national income distribution—adjusted to take account of regional price parities and household size— the study found that the metropolitan areas with the largest concentration of middle- class families are manufacturing centers, military towns, and Mormon communities— what the Brookings Institute refers to as "one of the three Ms." ese areas tend to have a high number of workers not only in manufacturing but in also construction and administration. ey also are mostly suburban in nature, lacking the subsidized housing and public transit found in older cities with a greater percentage of low-income residents. Demographically, they also tend to be less diverse, with predominately white populations. While small- and mid-sized metro areas have the most homogenous middle-class communities, the majority of middle-class families can nevertheless be found in or around larger cities that tend to support the same labor force in addition to lower-paying and higher-paying jobs. e study also revealed fluctuations in the middle class since the beginning of the millennium. Overall, the middle-class community has shrunk slightly, but this is due to a corresponding increase in higher incomes. e number of middle-class families in the areas described above have also decreased in relation to the number found in larger metro areas. Since 2000, the concentration of middle- class families in the South has grown substantially but fallen in the Northeast, along with the West Coast, and in a few cities located in the Midwest. Areas where the middle class has grown tend to have developed as newer metropolitan areas with distinct suburban characteristics. Metropolitan areas with the lowest share of middle-class families tend to be tech capitals and college towns. Whereas tech capitals are predominantly populated with high-income workers, college towns are mostly split between high-income faculty members and low-income students. For this reason, areas like the San Francisco Bay and towns like Boston, Boulder, and Huntsville, Alabama, tend to have a much lower percentage of middle-class families. Also, older cities tend to have smaller middle classes, such as many cities in the Northeast like Bridgeport, Philadelphia, and New York. THE ECONOMY AND THE HOUSING MARKET During a Mortgage Insights Speaker Series hosted by Altisource at Del Frisco's restaurant in Plano, Texas, industry thought leaders discussed the topic "e U.S. Housing Market: Where Do We Go From Here?" Kevin Cooke Jr., VP of Enterprise Solutions at Altisource, moderated the panel, which included Ed Delgado, President and CEO of the Five Star Institute; Tim Rood, Chairman and Managing Director of e Collingwood Group; and Rick Sharga, EVP, Carrington Mortgage Holdings. e panelists discussed the U.S. macroeconomic conditions and its state in the coming year, covering trends and predictions for the U.S. housing market in a rising-rate environment. "FHA and the GSEs are continuing to be important instruments of public policy, but we need to reconcile the government's motives and methods for achieving positive outcomes for renters and homeowners," Rood said. ey also explored the loan-servicing environment, record low delinquency rates, and emerging warning signs of potential economic turns on the horizon. ey also debated how the contentious political environment was affecting the housing industry. "ough we have seen a period of economic growth in recent years, there are leading indicators that paint a picture of an economy that is potentially slowing," Delgado said. "Of particular concern is the growing possibility of the yield curve that continues to flatten and move towards an inverted position. An inverted yield curve is almost always a harbinger for a recession within 18–24 months. Given the cyclical nature of the market, the mortgage industry should make preparations, ensuring readiness to the fullest extent possible whenever the eventual slowdown occurs." Additionally, panelists discussed how inventory and affordability concerns have been pulling against otherwise strong economic factors. "I think attendees got an inside look at why it's difficult to forecast the housing market today," said Sharga. "While a strong economy should be driving more home sales, the lack of inventory is driving up home prices, and diminishing affordability is keeping sales lower than what they probably should be. Consumer confidence is at an 18-year high, but lenders aren't taking on any risk and builders are reluctant to break ground on new developments, so demand— especially for affordable homes—continues to outstrip supply. Casting a shadow over all of this is the drama in Washington, where uncertainty over housing policy makes predicting the future almost impossible."