The income statement affluent (high income/low net worth) often subsidize the balance sheet affluent, aka the millionaire next door. Many of the income statement affluent paid top dollar for their homes at the peak of the residential real estate market. Often they did so with little or nothing down. Now these same houses are selling at steep discounts. Interestingly, during the 10 year period prior to the meltdown in the residential real estate market, fully 53% of the millionaire next door types did not move even one time; 24% moved only once during that period.
Now, according to an article in The Wall Street Journal, “Nationally 28% of sales [of homes in 2010] were all cash transactions. The rate was 14% in October, 2008.” You may ask,”who has enough cash to pay for a home in today’s economic climate?” Certainly the millionaire next door types do. Often, in down times, they inventory homes of this type, reselling them when the market improves. Some lease these homes; others allow their adult children to live in them. Note that this is not an unusual form of “economic outpatient care.” In fact, 51% of male millionaires (65% of female millionaires) indicate that they provided financial assistance to their adult children for the purchase of a home.
It is likely that the percentage of homes bought for cash will increase more. In many areas of the country, the price of residential homes continues to decline. So who is to say what a “good deal” is today or tomorrow?