This is an article posted by the Urban Land Institute about Baby Boomer households and their potential demand for high-density housing (http://urbanland.uli.org/Articles/2011/July/DuckerCondo)

by Adam Ducker

Date:  July 21, 2011

As increasing numbers of U.S. baby boomer households enter their empty-nester years and begin to think about retirement—or at least a change of lifestyle—developers should be thinking about what impact this demographic shift will have on the demand for high-density housing. While very much on the sidelines today, this robust group of homebuyers will begin feeling a sense of urgency ahead of the balance of the market, as the desire for new and compelling housing that facilitates a desired lifestyle increasingly outweighs concerns about the market, and their sense of what their current home was once or might be worth.

How many affluent seniors might actually move to a condominium and where? How many will choose to retire to a resort location or other area? Where—and how big—will the markets for these types of housing be?  To answer these questions, RCLCO helped craft a section of the March 2010 American Affluence Research Center survey of the top 10 percent most affluent Americans. Survey respondents, who reflected a range of ages, were asked to “contemplate a change of lifestyle related to retirement and/or their children leaving home.”

Sixty-five percent of respondents, according to survey results, expect to “age in place.” While this is a significant majority of the market, it is less than that of the previous generation, 80 to 90 percent of whom remained in their family homes well into their retirement years, typically until they needed more robust health-care services.

Those who expect to move therefore represent a finite—but still significant—market. Of the households that intend to move, about 60 percent plan to stay in their current metro area, moving to a different single-family, low-density home (40 percent), downtown condo (12 percent), or suburban condo (7 percent). Forty percent of those who expect to move—or 14 percent of all respondents—anticipate moving to a resort or other location.

Not surprisingly, perhaps, more eastern and central state households intend to move in their empty nester years, reflecting the added burden of maintaining a suburban home through the winter and other factors.

When we asked those who said they would consider moving to a condo what factors would appeal to them, we learned that they are equally concerned with unit features and location factors. Fifty-eight percent cited “proximity to restaurants/retail” as one of their top-three factors; amenities such as a pool (35 percent), views (35 percent), and parking (34 percent) also were cited as important.

These prospective condo buyers express a preference for a relatively large unit: 45 percent say they want one that is larger than 2,000 square feet (186 m²) and another 42 percent say they would consider a 1,500- to 2,000-square-foot (139 to 186 m²) unit. Many, however, might be accommodated in a smaller unit that is well designed, highly amenitized, and set in a community with significant on-site storage.

Most of this market still views condos—indeed, any form of post-family housing—as a “buy-down” option, with most (69 percent) expecting to pay more than 20 percent less than the value of their current home and only 4 percent expecting to pay more than the value of their current home. Developers will need to highlight the lifestyle benefits of new construction that offers modern technology, provides a more healthful environment, and reduces reliance on the automobile to inform consumers about the full-value proposition of new in-town housing. To quantify what these findings mean for the overall depth of the market, we examined the size of the affluent populations of major U.S. metro areas that are aged 55 to 74. Of the almost 8.5 million U.S. households that fit into this category, roughly half (4.5 million) reside within one of the nation’s 18 largest metro areas. Demand for high-end empty-nester condos in these key metro areas totals more than 250,000 units, with the deepest markets—New York, Washington, Chicago, and Los Angeles— totaling 20,000 or more potential transactions each.

The results of this survey and our analysis of the depth of the market offer three key takeaway messages for developers:

1) The market for condos targeted to affluent seniors is both meaningful and finite. Significant numbers of households in the largest U.S. metro areas are interested in this housing change. But demand for most products, particularly in smaller metro areas, can be measured in thousands—rather than hundreds of thousands—of units. Wise developers will understand the depth of the markets in which they are active, and will secure sites that are capable of strong market capture.

2) The product expectations of this population are fairly traditional. Prospective purchasers initially will expect large units with plenty of “bells and whistles” in appealing locations.  In high cost markets developers will need to coach some buyers into smaller units to capture as broad a market as possible.

3) Potential buyers’ financial expectations, while somewhat unrealistic, also are fairly traditional. These buyers expect to be moving down rather than up in terms of pricing; sales and marketing professionals will need to educate these consumers regarding the benefits of new construction and the overall value of high-density living.

These findings present challenges for developers, who will need to make smart location decisions and carefully fine tune their product offerings and price points to appeal to older, affluent homebuyers. They also will need to better educate prospective senior condo buyers about the realities of construction costs in order to convince them to accept smaller or more expensive units. The good news is that there is a market for high-end housing for seniors, and that savvy developers who are able to meet the expectations of these homebuyers should experience success in coming years.

Adam Ducker is managing director and director of urban development at RCLCO.

Posted in Affluence Research, Home Purchases & Remodeling, Vacation Homes | Comments Off

This is an article from CMO.com about social media and the affluent market (http://www.cmo.com/targeting/upmarket-brands-need-get-down-marketing-affluents).

Date: July 21, 2011

Author: Mark Dolliver, Contributing Writer, CMO.com

It’s tricky enough for marketers to reach consumers of any sort when a bad economy and a technological revolution happen at the same time, as is the case now. But it’s that much trickier for upscale brands to connect with affluent consumers, given the arcane folkways and media habits of the highly varied people inhabiting that category. In the age of Facebook, how are the affluent using new media, and how should upmarket brands target this audience in those venues? Some recent studies offer guidance as brands seek answers to such questions.

Despite a habit of sequestering themselves in gated communities, the affluent have not been shy about joining the social-networking crowd. In a small-scale poll last fall by SEI Wealth Network among individuals with investible assets of more than $5 million, 70 percent said they use social-media sites, including 17 percent who do so daily.

A broader survey this year by the American Affluence Research Center (AARC), conducted among the wealthiest 10 percent of U.S. households, also found widespread usage of social media. Half of those surveyed for the report participate in one or more forms of social media, including 40 percent who are on Facebook and 29 percent on LinkedIn.

As you’d expect, younger affluents are especially likely to be engaged with social media: Among the AARC’s survey respondents, 57 percent of those under 50 are on Facebook, as are 23 percent of those 60 and older. And affluent women are more apt than their male counterparts to be Facebookers (49 percent vs. 33 percent). Perhaps reflecting the age skew of the very wealthy, respondents with a net worth of $6 million-plus are less likely to be on Facebook than those in the $1.5 million to 5.99 million category (24 percent vs. 37 percent). And both of these cohorts are less likely to be on Facebook than those with a net worth of $800,000 to 1.49 million (47 percent).

The affluent also have plenty of gadgets, in addition to computers, with which to access social media. Thirty percent have an iPhone, 28 percent have a BlackBerry, and 13 percent have some other kind of smartphone. Twenty-two percent have an iPad or another tablet. Affluent owners of tablets have an above-average propensity for engaging with social media, and 57 percent of such respondents reported using Facebook.

When the affluent do get involved with social media, some of this socializing involves brands: Among AARC respondents who use social media, 26 percent said they “receive regular communications from a manufacturer or retailer to which they subscribe to receive product and related information,” says the report, with Facebook accounting for about two-thirds of these people.

Of course, this leaves a majority of the survey’s affluent consumers declining to engage with brands in this way. “It appears that large numbers of the affluent have not found compelling reasons for opting in to receive regular communications from retailers or brands,” Ron Kurtz, president of the AARC, told CMO.com. “That is the challenge that retailers and brands must overcome if they are to develop a good following through social media among the affluent.”

Curb Your Enthusiasm

There’s also the danger that upscale brands might be more enthused than their target audiences are about communicating via social media–or, at least, more indiscriminate. According to Kurtz, “The brands’ social-media management and their social-media agencies are at risk of communicating too often and sending information of limited interest to their audience, which is not totally homogeneous and has diverse interests and reasons for linking to the brand via social media.”

Even when a brand has accumulated a zillion Facebook fans, this doesn’t necessarily mean it is capitalizing shrewdly on the marketing potential of social media. That’s the key insight in a report issued last month by L2, a think tank that focuses on digital marketing. Titled “Prestige 100: Facebook IQ,” the report looked at how well 100 prominent luxury brands are doing at employing Facebook to connect with their target audiences.

“Although many prestige brands maintain a monocular focus on the size of their Facebook community, they have failed to embrace the authentic two-way communication and marketing activation required to monetize the platform,” stated the report, which was created in tandem with Buddy Media. Thus, while BMW, Clinique, and Johnnie Walker were among the upscale brands rated “genius” for their use of Facebook as a two-way medium, famous brands like Rolls-Royce, Givenchy and Rolex landed in the report’s “feeble” category.

Do the not-so-genius brands simply fail to grasp the nature of social media and their proper role in it? “Luxury brands today understand the importance of creating social communities and are making visible investments in their Facebook pages, and many are doing a great job at finding that balance between growth and engagement,” said Daniella Caplan, an associate at L2 and lead researcher on the Facebook IQ report, in an interview with CMO.com. “What we are seeing in many cases, though, is not a reluctance to engage, but rather a hesitancy to open up the discussion to a wider audience. These brands post content that they, themselves, find engaging without truly engaging with their fans. This strategy typically turns social-media properties into additional, albeit sizeable, broadcast-media channels rather than genuine social-media communities.”

Even among prestige brands that are good about at responding to fan posts, just four–L’Occitane, Kiehl’s, Korbel and Vacheron Constantin–responded to as many as 50 percent of them during the period of the study.

Posted in Affluence Research | Comments Off

This is an article from Bowden’s Market Barometer featuring AARC insights based on our Spring 2011 survey. (http://www.bowdensmarketbarometer.com/)

By Judith She

Published June 20, 2011

The spring 2011 Affluent Market Tracking Study conducted by the American Affluence Research Center (AARC) provides an optimistic perception of increased confidence and purchasing activity at the upper tier of the market. The 19th in a continuing series of twice-yearly surveys focuses on the 11.4 million US households that represent the wealthiest 10% of US households, as determined by The Federal Reserve Board, based on net worth.  These households account for about half of all consumer spending and a third of gross domestic product (GDP).

The 405 survey respondents represent households with a minimum net worth of $800,000 in 28 states and the District of Columbia.  At the time of survey, 88% of respondents were married, and the average age was 56.7 years. A full 75% of respondents were over the age of 50. 

Nearly 11% of respondents exhibited a net worth in excess of $6 million, and 6.7% reported average investable assets in excess of $6 million. Overall, the average annual income was $333,000; net worth averaged $3.1 million and investable assets averaged $1.8 million.

The AARC surveys measure and track how luxury and affluent consumers assess current business conditions and their 12-month outlook for the economy, the stock market and their personal household earnings.  Highlights of the survey findings include:

The composite Affluent Consumer Expectations (ACE) Index rose 21 points from the Fall 2010 survey and moved into positive territory.  All three components of the composite ACE Index were well above the Fall 2010 survey results. 

The index for future business conditions rose 23% points
The index for change in the stock market rose 26 points
The index relative to change in after-tax personal income rose 13 points

The assessment of current business conditions is at its best level since the fall 2007 survey. Capital appreciation has again become the primary investment objective, up 14 percentage points, while preservation of capital remains the top priority for those over the age of 60.

Spending plans for all 17 products and services tracked by the AARC surveys were much stronger in the spring compared to the fall 2010 survey.  Items of interest include:

Twenty-six (26%) percent of respondents are planning more domestic travel over the next year while 20% are planning increased international travel. The travel index of 114 is at its highest level since the spring 2007 survey and domestic vacation travel, which rose 15 points from the fall survey, continues to be the strongest category. 

The future spending indices relative to recreational activities – golf, skiing, etc. – rose 13 points since the fall survey, to 95, comparable to the spring 2007 survey.

Approximately 10% of respondents plan to purchase an existing vacation home or build a new one.  This level of interest is essentially at 2007 levels.

Approximately 5% of respondents plan to purchase an existing home as a primary residence or build a new one. 

Given the 11.4 million households represented by the survey, it is estimated that this wealthy market segment represents the potential purchases of 422,000 vacation homes and 536,000 primary residences over the next 12 months.

While familiarity with fractional ownership continues to lag (59% of the affluent say they are not familiar with the concepts of private residence or destination clubs) the incidence of Private Residence Club (PRC) ownership and Destination Club membership has increased significantly. A full 2.0% of respondents now have interest in a Destination Club membership compared to 0.7% in spring 2007 and PRC ownership interest has more than tripled since spring 2007, from 0.5% to 1.6% of wealthy respondents. 

Familiarity with the PRC and Destination Club concepts increases with age, income and net worth: Men more than women; those between the ages of 50 and 59 years; those earning in excess of $200,000 annually; and those with a net worth of more than $6 million are more cognizant of the concept.

The question that comes to mind is how to market this product more effectively.  Based on the AARC findings, social media is not the answer. 

With all the hype about social media — Facebook, LinkedIn, Twitter — a large percentage of wealthy households do not participate in this activity.  The spring 2011 AARC study shows that half of the affluent that do have a mobile device or a computer do not participate in social media.  Among those that do participate, only 25% use it to receive communications from vendors.  Said another way, just 12.5% of affluent households are using social media as a resource for purchases. 

The AARC study goes on to note that as age and income increase, participation in social media decreases. For instance, just 23% of those over the age of 60 participate in social media compared to 57% of those under the age of 50.  This condition is similar with regard to increased wealth; just 24% of respondents with a net worth of $6M+ use social media compared to 47% of those with a net worth of $800,000 to $1.49 million.

So while the National Association of Realtors (NAR) and the National Association of Homebuilders (NAHB) report that nearly 99% of buyers use the Internet to initiate their search for a new primary or secondary home, that number may not have much application to the upper crust. The affluent are buying again – not only because they’ve grown tired of frugal-mania but they recognize that lower prices will lead to greater capital appreciation. Targeting them may best be accomplished by an old fashioned method – the Zip Code. If one lives in a $1M+ neighborhood, one is presumably qualified to purchase a second home, or bigger and better primary home. Let Zip Codes show you where the money is!

Posted in Affluence Research, Home Purchases & Remodeling, Vacation Homes | Comments Off