October, 2013 – This article from the Chicago Tribune discusses how the affluent currently feel about buying new homes and what they’re looking for when they do. ( http://www.chicagotribune.com/classified/realestate/sc-cons-1010-umberger-20131011,0,6493790.column )
By Mary Umberger
Money, money, money.
The buying habits of the people who have it are analyzed endlessly, for obvious reasons — and few business sectors outdo the studious zeal of the real estate industry, judging from the mounds of data that regularly pile up in my inbox.
In just my current set-aside-for-later stack of printouts, for example, we find the conclusions of Better Homes & Gardens Real Estate, Coldwell Banker Previews International in collaboration with the Luxury Institute and the National Association of Home Builders, all of whom recently sought to inform us that affluent Americans these days are inclined to seek out homes outfitted with such house candy as exercise rooms, wine coolers and elevators.
The NAHB asked buyers who were planning to spend at least $500,000 on a house to rate, from a list of 120 items, the features they regarded as “essential,” “desirable,” “indifferent” or “do not want.” The top-rated “essential” feature: a warming drawer in the kitchen, according to the trade group, which said that 42 percent of buyers in that bracket want one.
The runners-up: a two-story foyer, a kitchen with a wine cooler, an outdoor kitchen, an elevator, a wet bar, an exercise room, a location in a golf course community and a game room.
Interestingly, in the aftermath of our “you can never have a house that’s too big” mentality during the housing bubble, the Better Homes & Gardens survey reported that 60 percent of its affluent buyers would trade away square footage to afford such lifestyle amenities as a better neighborhood, a house with character, more land, access to dining and entertainment, and/or a shorter commute.
Two-thirds of these affluents (defined in the survey as people who own homes worth $1 million and up) said it’s more important to them to have a “wired” home than a “green” one.
In the BHG report, the top “must-haves” were a garden oasis, outdoor fireplace or fire pit, and a separate guesthouse outside the main home.
The Coldwell Banker Previews International/Luxury Institute study claimed the top amenities for buyers with a minimum $250,000 household income included: an open floor plan, a fully wired home, a swimming pool, an outdoor kitchen and a home gym.
In Coldwell Banker’s view, one-third of its more wealthy buyers indicated they’re considering buying a residence in the next 12 months for personal use rather than investment. The report said homeowners who are younger than 55 are more inclined to buy right now than those 55 and older.
Among buyers who were reluctant, 24 percent claimed that they want to “remain liquid”; 14 percent said other investments appear better; 13 percent would need to sell property first and prices are too low; and another 13 percent are unsure about the economy.
Coldwell Banker’s report took some pains to assure us that these wealthy consumers use the services of real estate agents and have been satisfied with their performance. BHG pointed out that their luxury buyers believe homeownership is a more sound investment than the stock market.
No doubt, you would be shocked — shocked! — to learn that at least one avid student of the wealthy finds many such industry-sponsored surveys to be self-serving.
Ron Kurtz is an Alpharetta, Ga., researcher who twice a year publishes a report called the Affluent Market Tracking Study. Without naming any names, he said he exercises a bit of caution in reading many such reports.
“It’s a source of continuing irritation for me, trying to have a solid professional research practice,” said Kurtz, whose firm, the American Affluence Research Center, provides data on the care and feeding of the wealthy for automobile manufacturers, appliance companies, real estate developers, et al. The next incarnation of his study will be released Tuesday.
“So much research is done for promotional purposes, to attract media attention,” he said.
And Kurtz, who analyzes the attitudes of households with a net worth of at least $800,000, doesn’t see much of a headlong rush into real estate by the affluent any time soon.
“Of those with plans to acquire a house in the next 12 months, 5.8 percent say they’re considering the acquisition of a vacation house,” he said. “And 4.8 percent say they’re seriously considering acquiring a primary residence.”
Those numbers are less than half the levels seen in 2005, during the housing boom and before the recession, he said.
“Part of this (decline) reflects the aging of the population, but it’s also the situation with the economy right now,” Kurtz said.
His affluents told him they were generally going to hold their spending at current levels, though 37 percent said they’d be taking some action in the next year to reduce or defer expenditures.
When they do spend it, it’s more likely to be on vacation travel, new cars, remodeling their existing homes, and such leisure activities as dining out, movies, golf, etc., he said.
Still, Kurtz’s group expressed a certain amount of confidence in the economy — a “big jump” of 39 points in its assessment of current business conditions.
“I was kind of surprised at how positive they were, given that there has been negative news about the economy and foreign ventures,” he said.
And if they’re not into buying homes now, they’ve also tamped down their taste for jewelry, watches and designer clothes, Kurtz said. People with that kind of money these days are getting a little older, and they’ve got that stuff already, he said.