About 46 percent of wealthy Americans are more pessimistic about the real estate outlook in 2007, while only 15 percent said declining home prices are a concern, according to a survey by PNC Wealth Management, a part of The PNC Financial Services Group.
The survey was conducted online by Harris Interactive in October and November among 1,107 adults with annual incomes of $150,000 or more, at least $500,000 of investable assets (if employed) or at least $1 million of investable assets (if retired). The total sample included four groups: 500 with assets of $500,000 to $999,999; 434 with assets of $1 million to $4.9 million; 89 with assets of $5 million to $9.9 million; and, 100 with assets of $10 million or more.
“While PNC’s survey results showed the wealthy worry about real estate on a macro basis, it also revealed minimal concerns with their own property values,” according to a company announcement this week.
When asked if a decline in real estate investments other than their primary residence would be a threat to their family’s wealth, about 77 percent of respondents said it would pose a “small threat” or “no threat.” About 21 percent of survey participants said they accumulated the majority of their financial assets through residential real estate.
Fifty percent of respondents said they are optimistic about the stock market’s performance in 2007, while 34 percent are neither more optimistic nor pessimistic, and 16 percent are pessimistic about the coming year.
Among the ultra-wealthy — who have $10 million or more in assets — 23 percent expressed optimism about the stock market in 2007.
About 58 percent of survey participants said a terrorist attack in the United States is the greatest perceived threat to their wealth, while 56 percent cited a stock market decline, 54 percent cited the living costs of their retirement years, 51 percent said it was declining U.S. economic competitiveness, and 51 percent said the largest threat was the insolvency of the Medicare system.
“The economic fundamentals are still good,” stated Thomas Melcher, managing director and chief investment officer at Hawthorn, a division of PNC Wealth Management that serves clients with $20 million or more in investable assets. “But you now have these large geopolitical uncertainties — Iraq, Iran, Korea — the risks of which are influencing the economic expectations of high-net-worth individuals.”
About 28 percent of wealthy Americans expressed concern about the prospect of a recession, while 38 percent said this was not a concern. About 42 percent of respondents, including 38 percent of those with $5 million or more in assets, said they are more pessimistic about the United States’ ability to be the world’s economic powerhouse over the next year. About 25 percent of overall respondents and 23 percent of those with $5 million or more in assets, though, said they are optimistic about the issue.
Respondents, on average, invested 15 percent of their investment portfolios in cash, the survey revealed. “That’s a high weight, indicating diminished faith right now in the stock and bond markets,” Melcher stated.
About 56 percent of survey participants said they consider a decline in the stock market to be a threat to their family’s wealth, and about 27 percent said they were concerned about planning for a market correction. Thirty-nine percent said they were concerned that their investment returns might not be sufficient to counter inflation in 2007.
About 39 percent of those respondents with assets from $500,000-$999,999 said they were concerned about having enough money to retire early, while 14 percent of those with assets of $1 million or more expressed a similar level of concern.