WatchFor more than two decades, Diane Saatchi has worked as a luxury real estate agent in Long Island's glitzy Hampton neighborhoods, helping some of America's wealthiest men and women find their dream homes, or more likely, their second dream home. Saatchi's work has given her a front row seat to the decadent lifestyles of the country's elite, but in the last year or so, she's seen a subtle but surprising change in some of her clients
"I've noticed more wealthy people talking about shopping at Costco (Nasdaq: COST - News) and bragging about deals they found on Groupon," said Saatchi, who works for Saunders & Associates. "And by wealthy, I mean the kind of wealthy people who own two or three private jets."
Saatchi isn't the only one to notice these changes. Surveys in recent months have hinted at a shift in the spending habits and general lifestyles of wealthy Americans -- not just in how they shop, but in what they buy, where they live and when they can retire.
One Nielsen study found that 40% of consumers who considered themselves "coupon enthusiasts" in 2009 lived in well-to-do households with incomes of at least $70,000 a year. Moreover, Nielsen found that it was the Americans earning six figures who spurred the growth in the coupon market during much of the recession.
At the same time, wealthier consumers developed more of an appetite for fast food, buying 24% more of it in the second quarter of 2010 than the year before, according to an American Express (NYSE: AXP - News) report, far outpacing the nation's overall 8% increase in fast food consumption.
"The wealthy are dining out less frequently, shopping less frequently and most are still continuing to make changes to their lifestyle in response to the recession," said Pam Danziger, president of Unity Marketing, a luxury market research firm.
Some of these changes are far more severe than just cutting coupons. Realtors around the country have noticed an uptick in luxury rentals, hinting at a sea change in the rich deciding to rent rather than buy. And perhaps most striking of all, more than half of adults with a net worth of at least $15 million no longer consider themselves financially secure, according to a survey from Barclay's Wealth, with one in every 10 people interviewed saying they don't have enough money to retire.
IF 15$ million net worth doesn't make you feel secure about your financial future, than 1. you are probably over-leveraged and know it and 2. you have expectations for higher prices in the future
Lot's of people i know, who are closer to dirt poor than rich, have been earning higher incomes lately, getting raises, finding new better jobs. If you are betting on higher house prices from where we are now, you are betting that my generation (debt) is ready, willing, and able, to pour their surplus income into 30 year mortgages. That higher energy prices won't shift the desire for storage facility/mega house towards more reasonable, higher density housing.
Ten years ago, 3000 sq ft for a small family might have sounded fun, with .80 per gallon heating oil. Fast forward to today and it's 3.25.
Then again, once 5$ per gallon fuel is commonplace and it's adjusted prices and implications throughout the economy, house prices could sound cheap!
Now is a terrible time to buy. And at the same time now is a great time to buy
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Everybody's moving down a notch or two.
"Wealthier consumers developed more of an appetite for fast food," while those with eroding budgets had to cut it out entirely. I can't believe the number of bearded, rumpled young men downtown going through the trash cans and asking for handouts.
The more well-to-do are hitting the thrift and consignment stores, snapping up the good stuff (gently used and halfway in-style), and prices in the goodwills seem to be rising because it's hip to shop there. Thanks to eBay and craigslist, junk items are "vintage collectibles." I was looking online for some plates to replace my chipped and broken ones and the ebay sellers want the same as Replacements.com, or $25 each. I don't think I paid that much for an entire place setting back in 2005. Doll clothes cost more than I have paid for kids' clothes on sale. Etc.
You're right, we're rattling around in our big cold mansions out here in the boonies, but a little studio with a fat HOA in a city with *actual jobs* is valued twice as high, and I'm sure you'd save the difference in heating oil and commuter costs.
One thing we do have, though, is room for a garden. I understand there's going to be a huge shortage of tomatoes, and Wendy's already won't give you a tomato slice without a fight. http://www.ocregister.com/news/tomatoes-288972-produce-supplies.html
I'm looking forward to a summer of Cherokee Purples and Brandywine...as I watch our "zestimate" continue to plummet...
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ever since recession started i know a lot of people who make a lot less, i saw a lot of businesses close down. even i make roughly 30% less than what it was before the crash.
outsourcing, unemployment, more outsourcing, more technology replacing jobs.... we are in for a long deflation.
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SF ace,
I didn't claim that woman would no longer be buying frivolties. Drunks are still going to drink too, big surprise!. It just seems to me that many people, are looking to find a new degree of utility in their dollars, that they never bothered with in the past
Building on its plans to open 625 new stores in fiscal 2011, Dollar General Corp. (NYSE: DG) today announced that it plans to create 6,000 new jobs. The new stores and jobs will be spread among Dollar General’s existing 35-state operating area as well as three new states: Connecticut, Nevada and New Hampshire.
And you are correct, maybe it is you. Living in SF might give you a different perspective. I don't think that the new paradigm of thrift has to mean that people revert to never spending money and living as cheap as possible, just much thriftier than they were before. Everywhere i go, i am pleasantly surprised at the DIY attitude that people have taken on. What with so much information just a click away, and virtually free, we should all be cheering on humans being more resourceful. This leads to less waste, and better utilization of the best source of renewable energy going, human labor.
People being more efficient, and in turn saving more, leads to more surplus income. Do you think moving forward that people will return to yesterdays habits of massive sq ft., and long travel times, what with the prospect of ever rising gas prices on the horizon? My generation might be taking note to the fraud that has unfolded in the Baby Boomer system of supposed "retirement". And maybe there are many like myself, that have vowed not to participate in such a broken system built of lies
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SF ace says
Cupcake stores are popping up everywhere. Five bucks for a dry cupcake the size of a thimble, and fools rushing in to buy them.
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SF ace says
back in college economics we learned that when country is in deep trouble thats when people spend a lot on luxuries such as gold and other expensive unnecessary crap like that.
not sure of course if gold bubble has anything to do with this.
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Los Angeles, CA
Just a complete stab, but I think the wealthy/wealthier are just getting tackier, not more thrifty. That Hamptons summer home is certainly large and in-charge, but the interior likely happens to be a mosh of middle-Home Depot, Pottery Barn catalogue, and Jennifer Convertibles elephant leatherette marshmallow furniture.
As a buyer for a medium-sized retail chain, I am observing the mid-level consumer continue to spend, at least on nondurable goods in the $100 range. We and our competitors have actually mostly been raising price points quite signficantly. 2008 we were around $69-99 on comparable skus, and today we are ranging $89-129 on the same category of skus. The fact that this is in the middle is most surprising, as just a few years ago we were predicting the middle being lost as shoppers polarized to the low end and the high end. That has reversed--for now.
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ChrisLA says
One doesn't need to take economics in college to understand this. It is common sense. People bought their way into luxuries using HELOC,considered homes as their gold mines and now the system is trying to correct itself but the government/banks/home owners doesn't want that. Let's see who wins.
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Kent, WA
John Bailo's website
One downside to the rich acting poor is it puts pressure on the poor as described here:
Hansen Economy under threat
http://yrihf.com/viewtopic.php?p=5161&sid=2613a3f469ffbc07f5bc1a03de40abdb
The Hansen Economy Described
http://yrihf.com/viewtopic.php?p=4680&sid=2613a3f469ffbc07f5bc1a03de40abdb
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Thank you, Mr. Bailo, for the link and the term, "Hansen Economy." Obviously I can't speak for the six- and seven- figure-income households, but I'm experiencing that "pressure," or additional competition, for the pickin's here on the bottom. As I tried to say above, now that it's cooler to shop 2nd hand (and then blog about it, apparently), the goodwills have raised their prices. At thrift stores and garage sales, the seller has compared asking prices online and wants as much (or more, with the excuse that "Well, you'll be saving postage with me!").
My children are quite happy that we've reached the point where it's more time & cost-effective to buy a few new sale things at Target than to search and search and search for decent cast-offs. Just at the time I was getting ready to start sewing some clothes and curtains, our Walmart shrinks the fabric department down to a few balls of yarn and some scrapbook clutter. I asked a clerk why and she said nobody sews any more. Well, give it time and maybe people will learn again. Walmart put the local fabric shop out of business a few years ago.
If having $15million doesn't impart a feeling of security (oh, to have that kind of anxiety!), then so much for Trickle Down. If bonuses and tax cuts only inspire slumming at Costco, what must these ragged young men earnestly going through the trash cans be feeling? If the wealthy are clipping coupons, renting, and as noted elsewhere, strategically defaulting in higher percentages, well, whatever; they will always do what's best for themselves or they'll no longer be wealthy. Maybe someday they will have the inconvenience of having to place a hold on library DVDs.