Wealthy Take Advantage Of Homebuying Opportunities
You make money when you buy, not when you sell a home, suggests one popular idiom. That could be the reason the wealthy are trolling for bargains.
While most of America is struggling with four percent gains in inflation, the wealthy, with discretionary income of $100,000 or more, believe that today’s market is a good time to buy.
According to The Annual Survey of Affluence and Wealth in America, from American Express and the Harrison Group, 40 percent of the nation’s wealthy plan to buy real estate in 2008.
The participants were divided into groups — the upper middle class ($100,000 to $149,000 annual income), the affluent ($150,000 to $249,000) and the super affluent ($250,000 to $499,000.)
Of the wealthiest, 41 percent said that owning a second home was “almost a requirement,” with 33 percent in the market for such a home in 2008. One quarter are shopping for a third home.
The wealthy view real estate as diversification from their other investments, and 88 percent believe that real estate values will rebound. Asked if the real-estate market represents a buying opportunity, 67 percent of upper middle class respondents agreed, as did 72 percent of the affluent and the super-affluent.
But only the most wealthy were more committed to putting their money where their mouths are. Seventeen percent of upper middle class respondents plan to buy a home this year, as do 24 percent of the affluent and 26 percent of the super-affluent.
Not that it means they’re scared of the market. They simply could already be real estate owners.
One in ten homeowners owns a second home, twenty three percent of homeowners age 45-64 own two or more homes, as do 24 percent of those aged 65.
One-third of the homes sold in 2007 were to second-home buyers and investors, says the National Association of Realtors, even though only 13 percent had incomes above $100,000.
Owning real estate isn’t just for the wealthy. It could be one of the best ways to become wealthy.
Reprinted with permission from Realty Times, http://realtytimes.com.
May 6th, 2008 at 12:01 pm
This is article is very true when you are buying a home…which means property with a building on it. Land by itself is not considered investment grade by most lending institutions. This creates a limited market for most land sales. Investors must have cash or take out a line of credit against their existing home.
In my opinion, land prices have not corrected themselves in relation to the housing market…it will happen soon. When they reach that point, I am ready to invest.
May 6th, 2008 at 1:18 pm
Ross, thanks for your comment.
Some of that may be quite true. But, investing in land isn’t really like investing in securities. By definition, real estate is unique. So, a buyer really needs to examine a great deal of attributes of the land. Some of those are very subjective, but nevertheless contributory to value. Think of things like “quality of view” and “how quiet is it?”
Beyond that, the utility of the land is valued by many and valued highly. You can build a second home (vacation, weekend, retirement, etc.) upon the land. You can recreate there; hike, camp, photograph, bird, etc. Such utility is lacking in many other intangible investments like stocks, bonds, etc.
Many other types of investments can be diluted by manufacture or re-issue. But, land is largely finite. There is only so much of it. And, high quality land, land with views, quiet land, land with water frontage, etc., is even a more finite resource. The demand for such land is increasing due to the demographic that desires it. Over time, this finite supply and this increasing demand should inexorably lead to higher values.
May 7th, 2008 at 10:20 am
In AZ land prices have gone down nearly 40% in past 18 months. It looks as if that will be about it and with all the building KB Homes, Rhodes Homes to name a few that is projected to start their paper work some time in the near future investors need to get on the ball in NW AZ or they will lose out.