According to the latest Coldwell Banker's Luxury Index, America's wealthy homeowners invest heavily in home improvement and second homes, which is sending home prices higher.

The 2005 Coldwell Banker® Luxury Index study was conducted among 300 U.S. luxury homeowners, defined as those owning homes valued at $1 million or more. The research was commissioned by Coldwell Banker Real Estate Corporation and conducted by International Communications Research in March and April 2005.

Key home improvement findings from the 2005 Luxury Index revealed that:

• Thirty-one percent of luxury homeowners expect a tax refund. Of those, the majority (51 percent) intend to put that money back into their homes.

• Thirty-one percent will expand or remodel their residences in the next 12 months.

• Of the 36 percent of luxury homeowners who have refinanced or taken out a home equity loan in the last 12 months, 42 percent of them will be using the funds for home improvement or other real estate purposes.

"With more and more dollars allocated toward renovations, upgrades and additions, it is no surprise that property values continue to appreciate," says Jim Gillespie, president and chief executive officer of Coldwell Banker Real Estate Corporation. "The home improvement frenzy is likely a key reason why we are seeing a significant rise in sales of pricier homes through our luxury division, Coldwell Banker Previews International®."

A leading authority in luxury homes, Coldwell Banker Previews International sold $35.5 billion worth of homes valued at $1 million or more in 2004. Sales of homes in the $3 million plus range grew 35 percent in the first quarter of 2005 compared with the same period in 2004, said the corporation.

"The affluent American's most valuable asset is his or her home, according to our Luxury Index," Gillespie explains. "Luxury homeowners take great pride in their homes as symbols of their lifestyles and personalities. While these homes are already considered high-end, they are being transformed into more lavish and ultra-comfortable living spaces. In many cases, these affluent homeowners have more than one trophy property for either recreational, entertainment or investment purposes."

Luxury homeowners enjoy owning multiple properties. Twenty-seven percent own a second home and 17 percent plan to purchase a third home in 2005, using tax rebates and home equity to fund their purchases, among other means. Of those who already own a second or vacation home, significantly more respondents indicated that their second homes were used for recreation versus investment purposes. Fifty-four percent of homeowners who owned, or planned to own, a second home said it was located within 300 miles of their primary residence. The Coldwell Banker Luxury Index also found that the number of luxury homeowners planning to purchase second or vacation homes grew slightly since August 2004.

"These findings contradict the current notion that the affluent are purchasing second homes purely on speculation," notes Gillespie. "Rather, we have found that those homes are being used as recreational properties, as residences for children in college or for investment."

According to the study, nearly two-thirds (64 percent) of luxury homeowners said recent increases in interest rates will have no impact on their luxury purchases. This compares to 61 percent of luxury homeowners who answered the same way in August 2004 when interest rates were lower. Only 4 percent said that recent interest rate hikes will greatly impact luxury spending, with another 31 percent indicating that they will scale back luxury purchases.

Published: July 11, 2005

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.