How the other half lives...

November 16, 2004 8:10 AM

How the other half top quintile lives...Coldwell Banker has released the first Coldwell Banker(R) Luxury Index, a "study conducted in August 2004 of U.S. luxury homeowners -- those owning homes valued at $1 million or more -- concerning their attitudes, preferences and purchasing behavior related to luxury goods and services." You might be interested to discover that 61% of those surveyed stated recent increases in interest rates would have no impact on their luxury item purchases.
posted by Irontom (8 comments total)

I would've been more interested to discover how many stated that recent tax cuts would have impacted their luxury item purchases. Interest rate hikes don't make much of a difference if your invested savings are still appreciating faster than your debt; but part of the argument for tax cuts was that rich people will funnel their windfalls into more luxurious homes, thus imparting vital trickle-down benefits to indentured maids and undocumented immigrant landscapers everywhere.

Resistance pool? Is that like an over/under tracker for the casualty count in the next Iraqi car bombing?
posted by bl1nk at 8:37 AM on November 16, 2004

Yeah, I know some people that have been doing these kinds of studies for years, but its interesting to see big firms starting to put their names on them. Usually this sort of thing is left up to consultants.

You might be interested to discover that 61% of those surveyed stated recent increases in interest rates would have no impact on their luxury item purchases.

It does depend largely on what you define a "luxury item" as, and more specifically how you word the question in the study. My affluent market consultant friends have pointed out to me that there is two kinds of luxury - extravagance and percentage. The basic point is that for basic needs everyone spends about the same percentage of their income - one third on housing, for instance, and let's say one sixth on vehicles. Its just that for the affluent, that pie is much, much bigger, so 1/6 their income means 2 beemers and a hummer. 'Luxury' in that case simply means 'more expensive stuff designed to fit their income bracket'. This type of luxury item is, as this study suggests, relatively unaffected by things like interest rates.

The second kind of luxury, the 'splurge' kind, is something that everyone does as well, spending money on non-essential items as a personal reward or indulgence - vacations, expensive nights out, jewelry, etc. The affluent really seperate themselves here, however, because by just about every measure (frequency, magnitude, degree, percentage of income) they vastly outspend other classes. I'm not so sure that this type of luxury spending is as interest rate-resistant as you suggest, but I'd be interested in seeing the whole study to make sure. That priveledge, however, would for me no doubt count as a luxury purchase, and one I can't afford right now.
posted by ChasFile at 9:11 AM on November 16, 2004

Ever hear Chris Rock explain the difference between rich and wealthy?
posted by nofundy at 9:49 AM on November 16, 2004

nope - share the love man...
posted by Irontom at 10:09 AM on November 16, 2004

Irontom - Chris Rock in a nutshell:
Shaq is rich - the guy who pays him is wealthy.
posted by neilkod at 10:21 AM on November 16, 2004

Shaq is rich - the guy who pays him is wealthy.

That's a little facile, really. The guy who pays Shaq gets his money from hundreds of thousands of people who want to watch Shaq play. He's paid out of cash flow, basically, and by now there's no reason he couldn't be a team owner himself if he wanted to.
posted by kindall at 11:16 AM on November 16, 2004

stated recent increases in interest rates would have no impact on their luxury item purchases.

Why should they? Rich folks don't need to borrow money to live in the style to which they're accustomed.
posted by ikkyu2 at 12:12 PM on November 17, 2004

Interest rates might ot do it, but I imagine that the value of the dollar on the international market is going to start having an affect on their choice of vacation site soon.
posted by tizzie at 10:51 AM on December 3, 2004