Real Estate Investor: ‘There’s No Middle Ground in 10 Years’ as Middle Class Housing Splits Into Luxury and Affordability

Real estate investor Pace Morby recently joined Graham Stephan and Jack Selby on The Iced Coffee Hour podcast and laid out a stark forecast: the American housing market is splitting into two camps, ultra-luxury and bare-bones affordability, with no middle ground in 10 years. Morby argues that investors who keep targeting the traditional middle-class single-family rental will be squeezed out, and that the most durable plays sit at the extremes of the income ladder.

Why the Middle Class Is Disappearing

According to Morby, the strategic choice for operators going forward is binary. On one end, he points to Grant Cardone-style ultra-luxury and large-scale multifamily. On the other hand, he points to affordability-driven conversions of existing single-family housing into shared living arrangements. He claims Airbnb operators, squeezed by saturated short-term rental markets, are pivoting to co-living via platforms such as PadSplit, where he says the average rent runs about $850 a month including utilities. He also flagged Boxabl tiny homes being placed on vacant lots with government grant support as a vehicle for entry-level housing.

Morby tied the demand side of his thesis to labor markets, predicting that automation-driven job losses will accelerate the middle class’s decline. For context, the current U.S. unemployment rate sits at 4.3%, and University of Michigan consumer sentiment has fallen to 44.8, deep in pessimistic territory.

Does the Data Support His View?

The aggregate numbers do not yet confirm a clean split, but they do show stress for the average American. The Case-Shiller National Home Price Index sits at 329.9, at the 70th percentile historically. Existing home sales are running at a soft 4.17 million annualized pace. Housing starts dropped from 1,522 thousand units in March 2026 to 1,177 thousand in May 2026.

Household balance sheets back the affordability concern. The personal savings rate has compressed to 3.9% in 2026 Q1 from 6.2% in 2024 Q1, per the Bureau of Economic Analysis. Real average hourly earnings have softened to $11.24 in May 2026 from $11.38 in January. Credit card delinquencies sit at 2.92%, in the normalizing-stress zone.

Pace’s Real Estate Strategy to Capitalize on This Shift

Morby pointed to one of his own transactions as a model for the affordability bucket: a 161-unit Tucson multifamily property he says he bought for $20 million, structured as seller financing with no money out of pocket, a 4% interest rate, and a 20-year balloon. He claims the property now nets $100,000 a month. He also described an arrangement with Oxford House, a nonprofit he says offers landlords triple-net five-year leases on properties converted to sober living, covering the mortgage plus $2,000. These figures are self-reported and were not independently verified on the show.

For sourcing deals, Morby recommended creativelisting.com for already-negotiated deals and dealsauce.io for listings that have been sitting 100-plus days with no equity for subject-to transactions. Subject-to and no-money-down seller financing carry meaningful legal, contractual, and due-on-sale risk, and his site recommendations should be treated as suggestions rather than endorsements.

What to Watch

Pace Morby’s prediction is one investor’s view, and certainly not a guarantee of what’s to come. However, the underlying data points to a housing market under growing affordability pressure. Whether that ultimately destroys the middle class and creates a permanent split between affordability and ultra-luxury or proves to be a temporary cycle will be one of the biggest questions for real estate investors over the coming decade.