Home values in the East and West are higher. The reduction amounts are based on a comparison of national average and Midwest average home values by income level, from the Bureau of Labor Statistics. Still, spending for these households, and household 3, is greater than income. The Bureau of Labor Statistics notes that survey respondents tend to under-report their incomes, making expenditures appear to exceed incomes for lower income groups. But there are reasons aside from survey error that account for spending exceeding income.
Consumers tend to set their spending levels based on their long term expectations about income.
Those that experience temporary unemployment or business losses will maintain spending, using savings or debt. Those households that experienced such reversals would be counted in the lower income categories, and so the average spending by households in these categories is high relative to income.