Home ownership is most common among the wealthiest investors, who are likely to invest in other types of real estate, as well. Learn more about the “property values” of the rich.
Home Ownership is a defining characteristic of the middle class, but the wealthiest Americans are the most likely to invest in real estate, according to Millionaire Corner research that indicates that trend in real estate investing are likely to continue in the current economy .
Home ownership and investment real estate are considered alternative investments that can add diversity to a portfolio. Property is also valued as a hedge against inflation because real estate prices typically rise with increases in the cost of living. Some investment properties provide income as well as inflation protection. Real estate investing has its risks, as well, as painfully demonstrated in the recent financial crisis.
Less affluent investors appear most impacted by the real estate market crash and the most squeamish about home ownership, according to a Millionaire Corner study completed in the first quarter of 2012. Mass Affluent investors – those with a net worth of $100,000 to $1 million not including primary residence – are least likely to view their home as a stable financial asset and the least likely to recommend investing in real estate in the current economic environment. Only 43 percent believe it is a good time to invest in real estate.
Wealthier investors express more positive views of home ownership and real estate investment in general. Ultra High Net Worth investors – those with a net worth of $5 million to $25 million not including primary residence – are slightly more inclined to see their home as a stable financial asset and 45 percent believe now is a good time to invest in real estate.
Home ownership and investment real estate are most common among the highest tier of investors, Americans with a net worth of $25 million or more, not including primary residence, according to a Millionaire Corner study conducted in 2010. Virtually all the $25 million-plus investors own their principal residence, while three-fourths own a second home or vacation home and 46 percent own a third home or vacation home. Nearly one-fourth (23 percent) own time shares and 21 percent have vacation clubs. Close to half (48 percent) own residential rental property, 45 percent own commercial rental property and 44 percent own undeveloped land. One-third owns other types of real estate.
The mean value of these holdings is more than $5 million for a principal residence, close to $4 million for a second home of vacation home, and nearly $3.5 million for a third home or vacation home. The most valuable properties tend to be commercial rental property, with a mean value of $8.5 million among $25 million-plus investors, who also own undeveloped land with a mean value of more than $6.4 million.
In contrast, fewer than 90 percent of the Mass Affluent investors own their primary residence and only 15 percent owns a second home or vacation home. Ten percent owns undeveloped land and 9 percent owns residential rental property, while 1 percent owns commercial rental property and 4 percent owns any other type of real estate investment. Mean value for primary residence is $315,000 and a second home is $121,000. Mean value for undeveloped land is $46,000, residential rental property, $189,000, and commercial rental property, $61,000.
Data released by the U.S. Census Bureau in April shows that national home ownership rates have fallen to a 15-year low of 65.4 percent