Recent reports have suggested that America's wealthiest people don't place much stock in real estate values going up this year. But with the stock market so volatile, where else would they put their money?

According to asset manager U.S. Trust in its 2006 Survey of Affluent Americans, nine out of 10 wealthy portfolio holders said they expect an 8 percent return from U.S. stocks, while only 48 percent said they expect real estate to increase in value over the next year. Thirty-three percent of survey respondents expect real estate values to decline, up from 14 percent who felt that way last year.

Respondents had an annual adjusted gross income of more than $300,000 or net worth greater than $5.9 million, including real estate.

While the report failed to mention what percentage of their portfolios are held in real estate, it's clear that these investors aren't any better off investing in the stock market (unless they're insiders with inside information that allows them to dump before getting dumped.)

As rising interest rates have cooled housing in formerly hot markets, the stock market has taken several 100-point nosedives over interest rate fears, rising global interest rates, high gas prices, world unrest and rising inflation, illustrating that it's more volatile than housing as far as investment earnings go.

Home prices have continued to rise over 2006, but are far from reaching the double-digit increases of the past five years. This year, says the National Association of Realtors, home prices are likely to rise in the 6 percent range, which is about a point or two higher than inflation. That's an historical and far more normal return on residential real estate.

So how do wealthy people buy real estate? Do they choose the dividends over capital gains?

Like investors search for beaten down gems in blue chip and other oversold stocks, the wealthy spend their housing dollars on neighborhoods, houses and features that are likely to uphold and grow their investment.

They aren't overly lavish, and they buy for quality. They may have some widely-accepted luxuries such as designer kitchens, media rooms and wine cellars, but they don't tend to spend on amenities such as heated floors, tennis courts, or backyard putting greens.

Says a recent Coldwell Banker Previews International Luxury Survey, owners of million-dollar properties like to live well and they buy for comfort, but they make sure they have enough money left over to fund other discretionary purchases -- like second homes (35 percent) or investment properties.

"What that tells us is that they understand that real estate remains a solid, long-term investment, and one they can enjoy," says Jim Gillespie, president and CEO, Coldwell Banker Real Estate Corporation.

Eating well and entertainment are priorities for million-dollar homeowners, among others, suggests the survey:

• 65 percent have designer kitchens

• 37 percent have or are considering adding a wine cellar to their homes

• 59 percent have a room devoted exclusively to entertainment and of these, 89 percent can accommodate more than six people

• 84 percent have media systems such as DVD players and surround sound

• 57 percent have a wet bar

• 24 percent have movie-theater seating

• 54 percent own or plan to buy original artwork

• 86 percent have a security system

• 67 percent have professional landscaping

• 38 percent have an in-ground swimming pool

• 35 percent have a hot tub

Coldwell Banker supplies the investments that U.S. Trust failed to provide. Surprisingly, million-dollar homeowners don't appear to be large risk-takers when it comes to their holdings when they view them as retirement funds:

• 29 percent own stocks

• 23 percent own mutual funds

• 19 percent own real estate

• 14 percent own mixed portfolios including real estate

• 11 percent own bonds

• 11 percent own mixed portfolios excluding real estate

• 7 percent own a 401K

• 2 percent own CDs

• 2 percent own IRAs

• 2 percent own annuities

• 1 percent have a pension fund

Forty-three percent of luxury homeowners surveyed made more than $500,000 annually, with 41 percent earning between $200,000 and $500,000.

"Because of smart investments, equity in their homes, and in some cases, inheritances, luxury properties have become attainable for many Americans," says Gillespie.

"Our survey also pointed out that 35% of those surveyed own second homes and another 35% intend to purchase a second home for either investment or personal use in the next year," he adds. " Also, one third received a tax refund this year and 39% intend to put that money back into their homes and only 12% intend to use that money to purchase stocks.

"I think these affluent Americans realize that with 6% appreciation and a 20% down payment the return on their dollars invested the first year is 30%. That easily beats the average stock return the past 50 years of 10% and absolutely destroys the average stock return the past 5 years."