The American consumer remains willing to spend on non-essentials despite inflation and economic uncertainty, but a stark divide is emerging between affluent households and those with lower incomes—a trend that carries significant implications for homebuilders targeting different market segments.
According to a new analysis from Zonda Economics, discretionary spending held relatively steady through the third quarter of 2025, but the picture varies dramatically depending on income level. The research examined earnings reports from eight major consumer discretionary companies, including Apple, Delta Air Lines, General Motors, McDonald’s, Nike, Royal Caribbean, Starbucks, and Wayfair.
The top 10% of earners now account for approximately half of all consumer expenditures in the U.S., according to recent estimates by Moody’s Analytics. “Upper-income consumers, particularly those inclined to own assets that produce wealth, have retained the highest purchasing power, benefiting from stock market rallies and rising property values,” says Ali Wolf, Zonda’s chief economist.
The K-Shaped Consumer
The bifurcation, often described as a “K-shaped” economy, was most evident in companies serving broad consumer segments. McDonald’s reported that quick-service restaurant traffic from lower-income consumers declined nearly double digits in the third quarter while traffic from higher-income consumers increased by a similar percentage.
Delta Air Lines showed similar patterns, with premium seat revenue growing 9% while revenue from basic economy tickets fell. The airline noted that domestic corporate sales grew double digits, with mid-teens growth concentrated in coastal hubs where higher-income consumers are located.
Premium Market Strength
Companies positioned at the premium end reported exceptional performance. Apple achieved record U.S. revenue for a September quarter, with demand for new iPhone 17 models outpacing supply. Royal Caribbean saw robust booking patterns across all segments, with yields expected to be 37% above 2019 levels.
General Motors achieved its highest third-quarter U.S. market share since 2017 at 17%, with GM’s big SUVs—including the Cadillac Escalade, Chevy Tahoe and Suburban, and GMC Yukon—selling at 22- to 23-year highs. Wayfair noted that higher-end brands within its portfolio outperformed the core business, with average order value up 2%.
Housing Market Implications
“Consumer discretionary spending serves as a critical economic indicator because it reflects households’ financial confidence and capacity beyond basic necessities,” Wolf notes. “Historically, discretionary spending usually deteriorates before GDP growth slows, making it a leading economic indicator.”
The analysis arrives as overall consumer sentiment has continued to decline. The University of Michigan’s index of consumer sentiment fell in November 2025 to a level only slightly above June 2022’s all-time low.
For homebuilders, the message is clear: the market opportunity increasingly lies at the premium end, while serving entry-level buyers will require continued focus on affordability and value.
The insights in this article were taken from more in-depth research reports published in Zonda’s National Outlook subscription.
