As interest rates have climbed since then, mortgages have become less attractive. Home prices are sliding, but not at the same pace at which rates are increasing. These dynamics conspire to create a sluggish environment for home sales. On a relative basis, residential real estate seems downright moribund. This turn of events has surely affected low-income people, the middle class and even some of the wealthy—but the very affluent have experienced few of these shifts. This demographic continues to buy homes and improve them with renovations and additions at the same pace they did when the market was hot.

To better understand the insulating effects of wealth in the real estate market, in the first quarter of 2003 we surveyed 308 affluent homeowners about their personal residences. In the first quarter of this year, we updated the survey, questioning 326 different (but similarly wealthy) individuals. This is what we found:

• The perspectives and plans of individuals with a net worth of $1 million to $10 million have flipped 180 degrees from what they were in 2003.

• Those with wealth in the $10 million to $20 million range exhibit similar behavior, but to a lesser degree.

• The wealthiest segment, with more than $20 million in net worth, remain constant in both their actions and plans regarding real estate, as if there has been no change in housing inventory, prices and mortgage rates over the past four years.

Ownership Is Waning
There is a statistically significant decrease in the number of residences owned by families with a net worth of up to $20 million (Exhibit 1). In today’s real estate market, they are less inclined to own as many homes as they once did. The wealthiest group, however, continues to own, on average, more than three homes, because it suits their lifestyle.

Investments Only Increase in Value
In 2003, roughly half of all the affluent families surveyed considered their residential real estate an investment. This figure dropped to about one-third in 2007 (Exhibit 2). Families with a net worth between $1 million and $10 million revealed a significant proportional drop, while families with a net worth between $10 million and $20 million showed a slight decrease.

Again, the perspective of the wealthiest group hasn’t changed; they never viewed their personal residences as investments, and still don’t. They have no plans to profit from their real estate purchases and are focused instead on enjoying them.

Concern for Value
In 2003, just 2.6 percent of all the affluent families surveyed were concerned about their homes retaining value; given the environment, this sentiment is not surprising. That number jumped to 29.8 percent in 2007. The least wealthy segment expresses more anxiety, with more than half worried about the value of their homes. Roughly one in five families with a net worth in the $10 million to $20 million range convey similar concerns. The richest group clearly hold the bulk of the assets elsewhere, as none of them expressed concern regarding the value of their homes in 2003 or 2007 (Exhibit 3).

Driving Down Debt
All segments of wealthy homeowners share at least one trait: The equity in their homes has increased markedly from 2003 to the present (Exhibit 4). For all but the wealthiest, this increase comes as they no longer view their homes as investments. Instead, many of the wealthy now see their real estate as a domicile and want to decrease their overall debt. Still, in the context of overall wealth, the most affluent have not increased the amount of equity in their homes by a meaningful degree.

Home Improvements Still Desired
In 2003, the affluent families surveyed spent an average of $88,000 (in 2007 dollars) on home improvements. That number rose to $92,000 in 2007. While the lower end of our sample has dramatically scaled back spending in this area since 2003, families with a net worth in excess of $10 million spent the same or more than they did four years ago (Exhibit 5).

Plans to Buy Derailed
In 2003, when housing prices were still following an upward trend, roughly 40 percent of all the wealthy families surveyed expected to acquire an additional home worth at least $750,000 during the next three years. Today only 10.7 percent are expecting to purchase another property. But, once again, we find virtually no difference in the plans of the wealthiest segment. Those in the midtier showed a meaningful proportional drop from approximately 35 percent to roughly 20 percent. Interestingly, the idea of purchasing additional real estate is a nonstarter for the least wealthy families.

Despite the pronounced changes in the real estate market, little has changed among the wealthiest survey respondents when it comes to their perspectives on home ownership. The survey findings clearly demonstrate that families in this segment do not alter their plans or actions based on short-term market factors. Their position enables them to make purchasing decisions regardless of the macroeconomic situation. This includes the ability to buy homes that suit their preferences without having to consider current or future market conditions—behavior that is consistent in other areas of their lives as well.

Families with a worth between $10 million and $20 million are more attentive to the overall market. Their perspectives and responses have become more moderate, but the degree of their personal wealth provides them with a comfortable cushion that helps to insulate them from unfavorable economic trends.

The group most impacted by the reversal in the real estate market is the working wealthy. Among this group we see an overall decrease in the amount of real estate owned, less emphasis on their properties as investments, less spending on home improvement and fewer plans to purchase more high-priced homes. On the flip side, the working wealthy are more concerned about maintaining the value of their homes and are steadily decreasing their mortgages to avoid the threat of turning upside down if housing prices plummet.

Russ Alan Prince is president of Prince & Associates, a market research and consulting firm for the affluent, and the author of more than 35 books on related topics. Hannah Shaw Grove, an author and columnist, is an expert on the behavior, concerns and finances of affluent consumers.