I've said it before in some other threads, but I don't think I'll ever go back to a flagship phone. I just don't think that any performance benefit will ever be worth the increased cost. And I put all my phones in cases, so fancy styling doesn't appeal to me at all.
As others have mentioned, I haven't experienced any real degradation of performance for everyday stuff. Sure, you might get a little better pictures with a top-of-the-line phone, but mine have been pretty good for snapping pics of the kids. We bust out the DSLR if we want really good zoomed action shots at sporting events or for other special occasions like birthday parties, school plays, etc. I've never experienced notable lag for running web browsing, apps, games, music, etc. even when running multiples at once (e.g., web browsing while playing music to bluetooth speakers).
I've done the previous models of flagship from eBay/CL, but that carries some risk. Plus, I just like to unbox a brand new device and know that I can send it right back to Amazon or that I'll have manufacturer's warranty after that.
We've had a few Moto G's, and they are great value for the money IMO. I currently have a Huawei that I got for about $110 after Cricket Credit, and I have no real complaints (other than things I knew going in like lack of rapid charging). I just got my wife a ZTE Blade Pro for $117 from Amazon and it seems to be a really slick little device for the price. It even includes 5 GHz wifi, rapid charging, and USB-C that mine lacks in addition to 5.5" gorilla glass, dual rear cameras, fingerprint reader, dual-SIM/microUSB card support, etc.
I just can't imagine spending close to (or even over) a grand on a phone. I also just prefer to own outright. I can usually sell mine used for $100-150, so I can upgrade any time I feel like it for a minimal net expenditure. And if my kid chunks it in the pool, it's not a big deal as I'm not on the hook for the next 22 months of payments and don't have to carry insurance.
I feel like older people who are used to just getting their upgrade through their carrier, people who need the financing, and true enthusiasts are probably the primary market for flagships nowadays. I think most budget-conscious, tech-savvy people realize there is better value in budget to mid-level phones. Just my opinion of course, YMMV.