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They’re Rich, But Are They Buying?

Posted March 16, 2010 by Matthew Denton

A look at luxury buyers

By now, you may have heard of Bill Gates’ descent from the world’s wealthiest list according to Forbes. The highest accolade went to Mexican telecom giant Carlos Slim who is $53 billion richer than an average income earner in this country. But there’s no stopping our millionaires from getting richer. The Spectrum Group recently reported that total millionaires in the country rose by 16 percent in 2009 after a 27 percent decline two years ago. The report further explains, “Families with a net worth of at least $1 million, excluding primary residences, rose to 7.8 million in 2009, an increase from 6.7 million a year earlier. Affluent households, which the survey defined as those with net assets of $500,000 or more, increased 12 percent to 12.7 million, the Chicago-based consulting firm said in a statement today. The number of households with a net worth of more than $5 million rose 17 percent to 980,000, Spectrem said.”

Another report supports the rich-are-getting-richer trend when it states “Moreover, in terms of employment, there was no recession for the highest-income households in the fourth quarter last year. The unemployment rate for people in the top 10 percent of income—those earning more than $150,000 a year—was just 3 percent, according to the Center for Labor Market Studies at Northeastern University in Boston.”

What a good year this will be for the housing market, you might say. But spoiler of all spoilers, there’s one disappointment for us all. The Forbes report adds, “The highest number of affluent and millionaire investors said they were likely to invest in cash, which includes certificates of deposit, money-market funds and Treasury bills, over the next 12 months, followed by stocks and then bonds, said Spectrem. The biggest number of ultra-high-net-worth investors said they were likely to invest in equities, followed by cash and international investments. The fewest wealthy investors said they were likely to invest in alternative investments such as hedge funds and private equity, and investment real estate, Spectrem said.”

So clearly, I was expecting any mention of housing investments in the paragraph. I guess, the rich are not yet ready to buy and put their money back in the industry yet. I guess they’re not ready to take advantage of bargain prices and restore their confidence in the market.

But who’s going to be agree more with this news? The Wall Street Journal has an answer with a news title: “Taxpayers Who Earn $300,000 a Year Don’t Feel Rich.” At least, they speak in behalf of the residents in Boulder, CO.

Now, I’ll just wait for them to change their minds about the real estate market.

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