In other words, real estate investments are proving distressingly illiquid for many owners. Investors who have been relying on speculation that property values would continue to increase find themselves facing falling prices, rising interest rates and a credit crunch. Even the eternal optimists at the National Association of Realtors (NAR) foretell that real U.S. housing prices will fall in 2007 for the first time in 38 years. When adjusted for inflation, home prices have actually been falling for the past three years.

Tighter lending standards prompted by this spring’s subprime mortgage implosion could depress home sales even further than NAR’s estimates. Over the long term, obviously, real estate remains a solid play. But that’s little consolation to property owners who today find themselves highly leveraged and unable to extract any more liquidity from their residential property.

Certainly the high end of the market is not immune from this slump. In southern Nevada, for example, real estate was in freefall all spring. In March alone, permit activity for both residential and commercial construction in Las Vegas fell by more than one-third. Home prices suffered a similar downturn. Developers of Lake Las Vegas, a high-end residential and resort community in Henderson, Nev., recently released plans to refinance $580 million in debt to free up liquidity amid slumping sales.

In this issue of Worth, Russ Alan Prince and Hannah Shaw Grove parse high-end real estate in their new column, Calculated Response. For some 20 years, Prince and Grove have been surveying prosperous investors and analyzing their behavior. From Porsches to positive carries, Grove and Prince don’t have to guess what high-net-worth investors are thinking because they have the access and data to form facts from conjecture.

When it comes to real estate, Grove and Prince divide the responses neatly along lines of net worth. Those at the high end of the scale, worth more than $20 million, seem relatively unfazed by the recent real estate slump; they are buying new homes, refinancing and remodeling at the same pace, or better, than they were when the downslide began. Interestingly, however, even these individuals, apparently immune from the cyclical movements of the real estate market, do not seem to be following another investment axiom: When others are selling, buy.

But in the center of America’s wealthy demographic, property owners are much more leery. Those worth between $10 million and $20 million have shifted their perspective. Nearly one in five are "very concerned" about their properties holding value over the next three years. More telling, perhaps, is that their home equity has nearly tripled since 2003; they are no longer leveraging their properties, but are more intent on paying down debt. Only two in 10 expect to acquire an additional home in the next three years.

Finally, Grove and Prince describe the lower end of the affluent market as those worth from $1 million to $10 million. That group’s outlook has flipped 180 degrees over the past four years, they write. In 2003, less than 3 percent were very concerned about their short-term property values. Today, that figure is more than half.

While Pollyannas contend that the worst of the housing slump is behind us, realists are smart to think otherwise. The "middle-class millionaires," those whose acquisitive nature is tempered by conservative financial values, are the drivers of the real estate sector. They are pressing on the brake pedal and, as the U.S. economy slows in the second half of 2007, may pull off the road completely.