Two-year study examines record household debt, weakening balance sheets, and the government’s limited ability to respond to the next downturn

The affordability crisis once associated primarily with lower-income households is increasingly affecting families earning $100,000 or more, according to a new whitepaper from CapWealth, an independent investment advisory firm and multifamily office.

The paper, “Have We Built an Economy That We Cannot Afford?” draws on two years of research, federal data, consumer surveys, and CapWealth’s analysis of household balance sheets to examine how factors like rising debt, persistent inflation, and mounting fiscal constraints could limit the effectiveness of traditional economic support from the Federal Reserve and Congress.

The whitepaper highlights six key findings:

• Federal finances leave little room to maneuver. U.S. national debt has reached $39.2 trillion and is growing by roughly $8 billion per day. Net interest payments now exceed defense spending and are projected to reach $2.1 trillion by 2036.
• Consumers have not recovered from inflation. Headline CPI rose 4.2% year over year in May 2026, while real wages continue to lag cumulative price increases since 2021.
• Household debt is showing signs of strain. Total household debt has climbed to a record $18.8 trillion. Credit card delinquencies are at a 16-year high, while auto loan delinquencies have reached their highest level recorded by the New York Fed.
• Higher-income households are feeling the pressure. Families earning $100,000 or more are facing sharp increases in insurance, maintenance and mortgage costs, contributing to historically low consumer sentiment.
• Housing remains the central affordability challenge. Median prices for new and existing homes have surpassed $400,000, while a median-income family now spends approximately 32% of its income on housing.
• Commercial real estate faces refinancing pressure. Approximately $936 billion in commercial real estate loans mature in 2026, while office delinquencies in the CMBS market reached a record 12.34% in January.

The findings point to financial pressure across the economy. The Congressional Budget Office projects a $1.9 trillion federal deficit for fiscal year 2026 and expects debt held by the public to rise from 101% of gross domestic product to 120% by 2036.

Household finances are also becoming increasingly divided. While New York Fed researchers have described a “K-shaped” economy in which higher-income households remain relatively stable as lower-income households struggle, CapWealth’s research suggests that the pressures are beginning to move further up the income ladder.

“The affordability crisis is no longer confined to households at the lower end of the income spectrum,” said Tim Pagliara, Chairman and Chief Investment Officer of CapWealth. “Families with strong incomes are seeing more of their earnings absorbed by housing, insurance, debt service and everyday expenses. At the same time, elevated federal debt and persistent inflation could make it much harder for policymakers to provide the same level of support used during past downturns.”

“These conditions require investors and advisors to plan for a wider range of economic outcomes,” said Andrew O’Connor, CFA, Director of Research at CapWealth. “Financial plans and portfolios should be evaluated not only for market volatility, but also for higher borrowing costs and reduced policy flexibility. The goal is to understand where vulnerabilities exist and prepare accordingly.”

The whitepaper is not intended as a market forecast. It provides an assessment of the current economic environment based on two years of research by CapWealth’s investment team. Read the full whitepaper: "Have We Built an Economy That We Cannot Afford?"

About CapWealth

CapWealth Group LLC is an independent, SEC-registered investment advisor and multifamily office based in Franklin, Tennessee, with approximately $2 billion in assets under management. The firm is committed to helping individuals and families build and preserve wealth through personalized, fiduciary advice and portfolio management grounded in transparency.

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