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August 2007
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October 2007

September 2007

U.S. Real Estate Attracting Foreign Buyers

With the slide of the U.S. dollar against currencies like the euro, British pound sterling and even the Canadian “loonie,” it should come as no surprise that a just-released report from the National Association of Realtors -- 2007 NAR Profile of International Home Buying Activity (PDF 297k)-- shows that international home buying activity in the U.S. remains significant, despite the U.S. housing market slow down. 

American real estate is an attractive package for the foreign buyer. Political stability, lifestyle options, lots of inventory, and a favorable currency conversion rate are helping to draw buyers from around the world.  The report indicates  that even more foreigners would buy if Visa restrictions did not limit “time in country” to just six months.

NAR’s survey, conducted this spring and summer, reports that one third of U.S. Realtors have done business with international clients and seven percent of agents say that more than half their transactions are with foreign buyers.  While these buyers come from all over the globe, 33% are from Europe, 24% from Asia, 23% from North America (other than the U.S.) and 16% are from Latin America.   Drilling down to the country level, the top five sources of foreign buyers are Mexico, The United Kingdom, Canada, India, and China. 

Many of these international clients are luxury home buyers.  Twenty eight percent of recent foreign buyers purchased with cash, one in four paid at least a half a million dollars for their property and seven percent spent more than a million dollars.

The Priciest Zip Codes in 2007


In case you missed it last week, Forbes published their list of the 500 most expensive zip codes in the U.S. for 2007.   

07620 (Alpine, New Jersey) and 33109 (Fisher Island, Miami Beach, Florida) tied for the top spot, with a median price of $3.4 Million.

The rankings are based on median sale prices from June 2006 to July 2007 and are dominated by zips in California, Florida, and the NYC metro area.  If the rankings surprise you, it is worth noting that, as with all such studies, the methodology determines the results.  As the author notes:

Though often shorthand for neighborhoods, ZIPs don't change to reflect shifting neighborhood or demographic boundaries. The result? Our list is a bit slanted toward low-density enclaves like Alpine, where there are 333 people per square mile, as opposed to parts of Manhattan, where there are 45,800 people per square mile and a larger variance of home prices.

(In a world of lies, damned lies and statistics, it is nice to see a bit of explanation instead of spin).

From Servant to Manager

Robert Frank has a new post on The Wealth Report talking  about the death of the servant, the evolution of the "family office" and jobs with the wealthy in general.  He notes:

The bright side of all this is that jobs with the wealthy (be it butler, family-office manager or nanny) have become more like professional occupations than servitude. The rich no longer want servants. They want experts who can give them the best performance, whether it’s household service or investment performance. And that’s a change that can only be good for both the wealthy and the people who work for them.

Our research and experience show that expertise and competence are what the affluent seek and expect from their Realtors too.

As a side note, we are happy to have Mary Louise Starkey, founder and President of The Starkey International Institute for Household Management, Inc. (a.k.a. "Butler Boot Camp") as a speaker at our Leaders in Luxury event next month.  We're looking forward some great insights on working with the affluent from the "First Lady of Service"!

Über is the luxury word of the year

If you haven’t already noticed it, the word "über" is popping up all over the luxury market.  Fashion magazines talk about über designers.  Travel agents are offering über cruises to über cool locations.  Five star resorts are now über destinations.  It’s also creeping into real estate copy, replacing the words super, ultimate, and ultra. 

It’s this year’s hot new word.  Watch for it to hit the teenage set soon. 

Goodbye to “Awesome,” hello to “Über!” 

Affluence and Attitude: Slicing the Affluent Pie

If you've studied marketing or spent any time hanging around marketing geeks, then you know something, probably quite a bit, about "consumer segmentation".   It is one of the fundamental tools of modern marketing.

Segmentation is simply the process of dividing your potential customers into different groups, the notion being that it is easier and more effective to tailor an offering to a relatively small group of people with similar wants and needs than it is to try to mass-market something to the world.  (It’s surprisingly difficult to sell worms to people who aren’t fishermen, gardeners, or practical jokers).

Segmenting our potential markets is something that we all do intuitively.  We know that most products, or homes for that matter, are not going to appeal to everyone.  So, we try to define in our minds the “perfect buyer”.  Segmentation models are typically built around demographics (age, income, gender…), psychographics (lifestyle, personality, values…), geography (city, neighborhood, zip code…), and other personal attributes.

It is common to see people segmenting their potential customers based on things like gender and zip code, in part because it is easy to get this information, and get it in a form that can be immediately put to use.  There are more than a few list brokers who will sell or rent you a list of women 55 and older who live in zip code 90210.

The big question when looking at segmentation is: Are the segments and the attributes that define them really distinct and useful IN THE CONTEXT OF YOUR OFFERING?  A good segmentation model should be based on sound data, give you a sense of what the key purchase criteria for each segment are likely to be, and by extension how best to communicate with them.

Income and net worth are common attributes in segmentation models.  Everybody wants a piece of the folks with the fat wallets, and understandably so.  Robert Frank, the author of Richistan, the popular book on the affluent, divides the wealthy into three main groups (based on net worth):Richistan

  • Lower Richistan: $1-$10 million
  • Middle Richistan: $10-$100 million
  • Upper Richistan: $100 million-$1 billion

Segmentation by net worth or income is an obvious approach.  It is particularly useful for qualifying potential purchasers and looking at potential market size, but it isn’t always as useful as one might think in a working segmentation model.  The reason is simple.  While the groups affluent may be economically homogeneous, when it comes to the decision to buy or not buy a particular good or service, they can be very different and in fact have more in common with those outside their group than those within.

Let’s take the new Apple iPhone as an example.  While the members of all of the Richistani groups can obviously afford a $600 mobile phone, it is unlikely that the Lower, Middle, and Upper Richistanis who have purchased iPhones have done so for reasons related to their net worth.  It is much more likely that they share some common “needs” completely unrelated to net worth, and they have purchased the iPhone in an attempt to satisfy those needs.   When it comes to the factors that influence iPhone purchase, these Lower, Middle and Upper Richistanis have more in common with each other than they do with their peers who share the same net worth.

The same is true with luxury homes.  While income and net worth are qualifying factors in terms of ability to purchase, they may or may not have any bearing on the desire to purchase, or actual purchase criteria.

If that’s the case then how should we segment the affluent?  Every year, companies spend millions of dollars on research and analysis in attempts to find better ways to answer this question.   Estee Lauder, Forbes, deBoulle, and Maybach (Daimler Chrysler) have all turned to Premium Knowledge Group (PKG) for insight.  As we've noted in previous articles and posts, we have too.

PKG has conducted perhaps the most rigorous and comprehensive research on the affluent available, and based on this research, has developed a unique segmentation model.  Their Affluent LifeStyle™ Marketing model identifies six distinct (statistically significant) segments among the affluent, each unique in terms of priorities, motivations, and preferences (but notably, not income levels).

The six Affluent LifeStyles are:

  1. Unmistakable
  2. Tasteful
  3. Dependable
  4. Understated
  5. Economical
  6. Practical

Previous article on Unmistakable vs. Understated affluents.

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