This national survey included 615 men and women in households with an average annual income of $302,500, an average net worth of $3.3 million, average investable assets of $1.5 million, and an average primary residence value of $1.2 million. This is the 12th in a continuing series of twice-yearly surveys among the wealthiest 10% of U.S. households.
In general, the respondents seem to be cautiously optimistic in their outlook for the economy and conservative in their future spending plans, which is consistent with a general economic outlook of reduced growth without a recession.
These results might be considered encouraging, given that the survey was conducted during September, just after the August stock market volatility and during the mortgage market turmoil. These factors, together with the weak housing market, may have caused some apprehension about the 12-month outlook for the economy.
The composite Affluent Consumer Expectations (ACE) index of 101 represents a modestly positive 12-month economic outlook despite the negative index (93) for future business conditions. The composite index is strengthened by a positive outlook for the stock market (104) and personal income (106). Index values can range from 0 (negative) to 200 (positive), with an index of 100 being a neutral reading. The wealthier respondents are more optimistic in their economic outlook and spending plans.
The composite index has declined in each of the last three surveys and is close to the record low of Fall 2005, a time when responses may have been influenced by the extensive media coverage of the potential negative economic consequences (the risk of increased inflation, higher interest rates, and a recession) resulting from Hurricanes Katrina and Rita.
In addition, the respondents are showing increased conservatism in their spending plans in many product and service categories.
Those expressing no plans for major expenditures in the next 12 months have been at relatively constant levels during the last five surveys, with 43% of current respondents reporting no such plans. The number of those with no plans for major expenditures might have been expected to increase given that the economic outlook is less optimistic than in past surveys. About two-thirds of the wealthiest households (minimum $6 million net worth) do plan to make major expenditures in the next 12 months.
Plans for motor vehicle acquisitions, cruises, major home remodeling, purchase of an existing home as a primary residence, and building new primary residences are up modestly from the prior survey. On the other hand, plans to purchase a boat, an existing home as a vacation residence, and to build a new vacation home are down slightly.
Given the 11.2 million U.S. households represented by this survey, it can be calculated that this market segment during the next 12 months represents approximately 3.0 million potential motor vehicle acquisitions; 2.7 million potential home remodeling projects; 2.5 million cruise buyers (for 5.0 million total cruisers); and 605,000 acquisitions of both primary residences and vacation residences.
Of the 17 future spending categories tracked, only five are in positive territory. Among the five positive indexes, four were down from the prior survey and one was unchanged. Of the 12 categories with negative indexes, three were up, one was unchanged, and eight were down from the Spring 2007 survey.
Overall, the index for 12 of the 17 categories decreased from the prior survey. Of these 12, five had decreases of five points or more (domestic vacation travel, home computers, designer apparel, fine jewelry and watches, and charitable contributions). The largest decline (10 points) was recorded for fine jewelry and watches.
The Future Spending Index average of 91.5 lost most of the ground it recovered in the prior survey and is at its second lowest level since this measure was first reported in Fall 2003.
The Affluent Consumer Expectations (ACE) spending indexes for Future Home Durables Spending, Future Leisure Spending, and Future Vacation Travel Spending were all down from the Spring 2007 survey, but all remain equal to or above Fall 2006 levels. Only the Vacation Travel Spending index is positive.
Just over one-quarter (27%) of the respondents own multiple homes for personal use, with the vast majority of these owning a total of two homes. Ownership of three or more homes for personal use is concentrated among the groups with the highest net worth, income, and primary residence value.
For those with multiple residences for personal use, the average value of the primary vacation home is $865,000 and the median value is $679,000. The value of the primary vacation home increases as the value of the primary residence, income, and net worth increase. For those in the highest net worth group ($6.0 million and above), both the mean and median values of the primary vacation home are $1.3 million.
The average market value of the primary residence (at $1,389,000) of the multiple home owners is about 60% greater than the average value of their vacation home. About half of the respondents own a second home within a day’s drive of their primary residence. This may indicate more frequent use (e.g. weekends) while the more distant vacation homes of the wealthier and older respondents may indicate more seasonal use of the vacation home.
The 22-page/19-table Fall 2007 Affluent Market Tracking Study #12 is available to affiliates of Interval International at a 25% discount off the usual price of $395 ($595 with a full set of 65 pages of cross-tabulated data). To order, send an email to info@affluenceresearch.org and include the purchase price, your name, and the name and mailing address of your organization. Or you can call 305-933-4887. AARC accepts checks and credit cards.
As an inexpensive way to conduct research among the affluent, you can purchase proprietary questions in these tracking studies for your exclusive use.
