USA Today reported this week that “foreclosures among borrowers with prime conforming loans have shot up 425% since January 2008” and “jumbo prime loans not eligible for purchase by Fannie or Freddie have done even worse — foreclosures on those have increased nearly 600%. Jumbo loans are typically mortgages of more than $729,750.”The article goes on to quote RealtyTrac research indicating that that although the U.S. may be seeing signs of a peak in foreclosures in some of the hardest-hit markets, foreclosure activity rose in 154 out of 206 largest metropolitan areas in the first half of 2010.
As we discuss in our training, categorizing the affluent is more a function of attitudes than the age of the money.
In his post, "The Four Species of Wealthy Consumers" Robert Frank of The Wealth Report highlights a recent study that looks at the issue of social status and brand prominence and suggests a new segmentation model that uses attitude to build on the Old/New Money model. The study groups people into four categories based on their relative level of wealth, desire for social status, and desire to associate or disassociate themselves with their own or other groups:
Patricians are wealthy and understated. Their primary concern is associating themselves with other Patricians using subtle cues. They buy high end luxury goods without prominent logos and branding.
Parvenus are relatively wealthy and crave status. They seek distance themselves from less affluent the Poseurs and Proletarians, and to associate themselves with other affluents, both Parvenus and Patricians. The study suggests that they like prominent logos, particularly Louis Vuitton. (What we might call "flamboyants").
Poseurs want to be Parvenus but lack the financial means. They are "highly motivated to consume for the sake of status" but often can't afford luxury goods. They are consumers of counterfeit luxury goods.
Proletarians are generally not consumers of luxury goods. They are neither affluent nor status conscious (when it comes to brand prominence). They don't seek to associate themselves with the "haves," nor do they seek to distance themselves from others of "humble means."
Robert raises an interesting question in his post when he asks,"Which category do you think you fall in? Or is there a fifth category? (Would Warren Buffett be a billionaire proletarian?)"
This study looked only at wealth, logo prominence, and desire for social status. The resulting data suggested these four segments. If these are overly broad and you want a fifth category, you need a new study! (For a more detailed model that will accommodate folks like Warren Buffet nicely, I would suggest PKG Lifestyles).
Let's cut to the chase: Is this a useful model? Can you apply this in your business?
I would say maybe. In luxury real estate, you'll only be dealing with the affluent Patricians and Parvenus (you'll screen out any Poseurs that try to sneak in when you qualify your prospects), so this model doesn't provide many useful insights beyond the old notions of Old and New Money. It is certainly not as specific or as useful as the PKG Lifestyles model.
That said, using the notion of Patricians/Parvenus is certainly better than nothing at all. Identifying prospects and clients as Patricians or Parvenus and determining which group a property is likely to most appeal to could be quite useful, particularly when it comes to understanding client wants and needs and choosing the language that you use in dealing with clients or prospects and in positioning properties.
A RE/MAX study earlier this year found that among their agents, those with the Certified Luxury Home Marketing Specialist® (CLHMS) designation were the highest earners in RE/MAX and earned more than those with every other designation (an average income of $177,800 in 2009).
The CLHMS course for RE/MAX University features special pricing and a choice of bonus modules:
- Working the International Market
- Luxury Home Short Sales
RE/MAX agents can find more information and register on Mainstreet.
Forbes has an interesting, interactive "data graphic" that shows where Americans moved in 2008. Click on a county and you'll see lines indicating where folks moving to the county came from, and where folks leaving went.
Here's the mass exodus from Detroit:
The pattern for Palm Beach County is what you might expect:
Hover over a county and you can see the net inbound and outbound migration between those two locations:
It is an interesting way to look at market dynamics that could inform your marketing. Plus, it's a lot more fun than plowing through raw IRS data!