But wealth is more than a balance sheet.

Wealth is relative. It is a concept which is defined largely by the economic, social, geographic and educational background of the person attempting to define it. So maybe we should consider it a perception or an ideal, which often changes as we age, become more educated, raise families or even move from one location to another. 

American sociologist Leonard Beeghley defines “the rich” as households with a net worth exceeding $1 million dollars. Yet, even using this simple baseline measurement can be controversial as many economists and statisticians argue over how a household’s net worth is calculated.   For instance, one of the two most commonly used measurements counts the total value of all property owned by a household minus the household's debts. According to this definition, a household owning an $800k home, $50k in furnishing, two cars worth $60k, a $60k IRA, $45k in mutual funds and a $325k vacation home with a $250k mortgage, $40k in car loans and $25k in credit card debt would be worth $1,025,000. 

Following that logic every individual in this household would be a millionaire.  But take the family home out of the equation and maybe not.  

With the exception of the lower end of the market, the vast majority of luxury home buyers fit into the category of a high-net-worth individual (HNWI) – an individual with a net worth in excess of $1 million dollars (excluding their personal residence). In a past survey by the research group TNS, in the U.S. a record 9.3 million households reported assets of $1 million dollars or more. These households on average have a net worth of $2.5 million and a median age of 59. In another study conducted by the Spectrum Group they found that the number of household with $5 million dollars or more (excluding personal residence) grew to include over one million households for the first time in 2007.  According to the 2007 World Wealth Report from Merrill Lynch:

• HNWI’s grew their net wealth by an average of 11.4%.
• Globally the HNWI population grew by 8.3%. The strongest gains were found in the emerging markets of Africa – 12.5%, the Middle East 11.9% and Latin America 10.2%.
• Likely future leaders for HNWI growth worldwide – China and India – saw recent GDP growth rates of 10.5% and 8.8% respectively; the highest in the world.
• Worldwide the Ultra High NWI’s control $13.1 trillion dollars of wealth.  Interestingly this group is consistently able to grow their net worth faster than all other wealth accumulators.

Because of this, in spite of the current economic conditions, worldwide wide wealth is rapidly consolidating and the rich are getting richer – faster. 

The Forbes list of the world’s richest people indicates that there were 946 billionaires (USD) in the world representing a total net worth of $3.5 trillion dollars in 2007, and for the first time ever the Top 400 Richest Americans all had a net worth of at least $1 billion dollars. And while 97% of millionaires are homeowners, only 2% inherited all or any part of their homes or property.
 
So it begs the question … What does it mean for the real estate industry?

Real estate is always thought of as a solid investment and with the value of the dollar against foreign currencies coupled with a depressed real estate market the U.S. real estate market is coming up on the radar of many luxury home buyers around the world. 
The current market conditions may very well provide some excellent opportunities in a number of niche markets and the luxury home segment may very well be one worth looking into.  It is certain that others around the world have their eyes focused on our market. 

To learn more about the luxury home market you may want to check out the Accredited Luxury Home Specialist (ALHS) from the Luxury Home Council.  Click here for more information on the ALHS designation