Coldwell Banker says owners keep spending even after buying luxury homes. July 11, 2005: 8:32 AM EDT
By Les Christie, CNN/Money staff writer
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NEW YORK (CNN/Money) -
Owners of luxury homes are pouring cash into their properties, according to a report by Coldwell Banker. The company released its Luxury Index today, which revealed that many luxury homeowners are using income, money from tax returns, and home equity loans to pay for improvements to already expensive houses.
According to the report, these home improvements contribute even more fuel to the already blazing real estate market by fostering an upward spiral of high prices, followed by upgrades, followed by even higher values, that shows little sign of abating.
Coldwell Banker's sales of homes costing $3 million or more rose 35 percent during 2005's first quarter compared to the first quarter of 2004.
"The home improvement frenzy is likely the key reason why we are seeing a significant rise in sales of pricier homes," said Jim Gillespie, CEO of Coldwell Banker Real Estate, spells out the trend.
The way the money goes
The Luxury Index surveys 300 U.S. households with incomes of $100,000 or more and have purchased a million-dollar home during the past two years. The index's other findings include:
Thirty-one percent of luxury home owners expect to receive a tax refund this year and 51 percent of these will put much or all of that refund back into their homes.
A total of 31 percent plan to expand or remodel their homes during the next 12 months.
Thirty-six percent have refinanced or taken out home equity loans during the last 12 months. Of those, 42 percent will use the money for home improvement or other real estate purposes.
When asked what improvements they planned to spend on in 2005, homeowners responded with:
Landscaping/topiary -- 23 percent
Home theater -- 13 percent
Kitchens -- 12 percent
Hot tub -- 10 percent
In-ground pool -- 8 percent
Wine cellar -- 6 percent
Like most American homeowners, owners of luxury homes have, on average, more invested in their properties than any other single asset, according to the survey findings. And 27 percent of them already own a second property as well, while 17 percent more plan to buy a second home this year.
Gillespie says, "In many cases, affluent homeowners have more than one trophy property for either recreational, entertainment or investment purposes."
For a look at some luxury homes that are on the market, click here.
