Two of Chicago real estate’s most well known names, Mary Umberger and Paul Boomsma, recently discussed upper end clientele and “bargains” in Ms. Umberger’s Chicago Tribune weekly column.
The article, entitled “Even the rich are jostling for bargains” tells is like it is for the so called one per centers. Boomsma, a 20+ year veteran of the industry is president of Leading RE’s Luxury Portfolio Fine Property Collection, a Chicago based real estate network of luxury brokers from around the world.
Following are exerts from Mary’s excellent Chicago Tribune article, where Boomsma discussed result’s from his firm’s sponsorship of the “Survey of Affluence and Wealth in America,” produced by Harrison Group and American Express Publishing:
Q: Who do you study?
A: We’re really talking about the top 10 percent of the nation’s population. We look at people’s discretionary income; what they’re able to spend each year after they’ve paid their primary mortgage and taxes.
We break them down into three groups: The first, we call the Upper Middle Class, has $100,000 to $125,000 of this discretionary income; the Affluents have $125,000 to $249,000; the Super Affluents have $250,000 to $499,000; and the Truly Wealthy have more than $500,000.
Q: You contend that huge numbers of people in these categories, despite their wealth, think of themselves as “middle class.” Why is that? Are they deluding themselves?
A: A large number of them are newly wealthy. They made all their money themselves. In the Harrison Group research, 79 percent of them said they grew up middle class, and they still think of themselves that way.
This shows up in some interesting ways. In their own way, the new wealthy have a tight relationship with the dollar. It shows up in the family that’s very, very wealthy, and they may be staying in a luxury hotel, but they’re going to tell the kids, “Don’t touch the mini-bar, we can’t afford that.” They have, in their own way, a different knowledge base about overpaying for things.
Q: How does this translate into real estate?
A: They are absolutely looking at value. (My organization) had a buyer a couple of years ago who was looking at a multimillion-dollar property in Miami but insisted on seeing the place’s electric bills from the past two years. He wanted to know what it was going to cost him to light the place. You’re talking about a home where the property taxes could easily be $60,000 to $80,000 a year, and the electricity may be $500 a month. It’s almost irrelevant, but it’s a little bit like that person in the big hotel suite: taking the Diet Coke out of the mini-bar isn’t going to kill them, but the newly wealthy have that kind of a relationship with a dollar.
Paul’s right, I guess you don’t get rich by drinking that $5 can of diet coke….