News Column

What the Rich Are Spending Their Money On

May 31, 2013
Rich

Home values are rising, the unemployment rate is falling and the stock market is reaching new highs -- cause enough for some to pop a bottle in celebration.

And Americans are regaining their champagne tastes.

The luxury market, in many ways a key indicator of the broader economy's future, is by many indicators on a rebound. Local upscale merchants are in step and encouraged by signs they haven't seen since before the housing bubble burst. Click the thumbnail above to watch a video on how Duxiana in Red Bank is doing.

Congress' best attempts to further stall the economic recovery is putting a damper on overall consumer confidence, which fell almost 11 points since September, according to the American Affluence Research Center in Georgia. But America's upper crust has a slightly brighter outlook, the center said in its latest report.

That confidence is evident in New Jersey with big-ticket purchases in recent months, despite fiscal gridlock in Washington and the devastation of superstorm Sandy, merchants say.

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For example, Bass River-based Viking Yachts was selling between 50 and 55 boats a year after the recession. From January to March this year, the boat builder took orders for 32, putting it on pace to reach new highs for the fiscal year, which ends in July, communications director Peter Frederiksen said. That is in line with winter boat shows, whose vendors saw "some of the best sales they've seen in years and a renewed, positive sentiment among attendees who came ready and eager to buy," Colleen Richardson, of the National Marine Manufacturers Association, said.

The association expects to see as much as 5 percent to 10 percent growth in recreational boating this year.

In the last couple of years, "it just seemed like people were hesitant to making a commitment to build a new boat. There were always excuses, but people were always coming to the (boat) shows," Frederiksen said. "What we see is just a strong surge. People are tired of sitting on the fence."

That usually trickles down to the greater economy.

Ron Kurtz, president of the affluence research center, said the wealthiest 10 percent of U.S. households, based on the 11.4 million households with a net worth of $800,000 or more, account for almost half of consumer spending and about one-third of gross domestic product.

"What they do has, potentially, a major effect on the overall economy," Kurtz said.

Viking's purchase orders prove that theory. This year, the company of roughly 800 employees hired an additional 85 people to fill the orders, and is looking for more help, he said.

"Nationally, everything seems to be making a jump -- Mercedes-Benz, Porsche -- they all seem to be coming back, which is nice to see," said Peter Scherr, general manager of Schneider and Nelson Porsche in West Long Branch.

He declined to give local figures, but Porsche sales in North America are up 29 percent from this time last year; at the manufacturer's nine New Jersey dealerships, sales are up 34.6 percent, spokesman Dave Engelman said.

That continues a two-year trend of increases, but Scherr is hesitant to call it a comeback.

"There's still some tentativeness," he said.

Kurtz said that for the most part the affluent are committed to maintain their spending, but have reserved optimism that the economy and stock markets will greatly improve in the next year. They expect that recent that changes to the payroll tax that withhold more money from an employees' paycheck will cause a decline in their income, but their net worth likely will rise because of the value of their individual stock holdings and an expected appreciation for their home and real estate values, he said.

Maria Rathyen has seen a marked shift in consumer attitudes this year at her upscale mattress shop, Duxiana, in Red Bank. King beds can top $11,675.

Sales in January were up over the same time a year ago, which is encouraging since January tends to be sluggish the holiday season, she said. Sales are up 12 percent over the same time last year, she said.

During the last couple of years she would usually hope to have one day better than the next, and often it didn't happen. But now the store, which sells bedroom sets for about the same price as a used Honda, is stringing together more good days than bad, she said.

And there is one encouraging telltale sign that Rathyen believes will set the trend for an upswing in the luxury market.

"People are coming in and actually buying things and they're not asking the price," she said. "When someone come in and places a $3,000 order for linens and doesn't ask the price, that's like the old times."

Lee Neves Jr., owner of the Neves Jewelers chain, said he has seen more impulse buying, too -- a result, he suspects, of improving home values and sales.

"Once they feel confident in the housing market, they feel better that their homes are worth more and they don't feel so bad spending their money," he said.

Neves is optimistic for the future, but doesn't get too excited or confident that there's a full comeback.

"With the way things have been the last three years, you have to be cautious because you remember things can take a turn for the worse," he said.


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Source: (c) 2013 the Asbury Park Press (Neptune, N.J.) Distributed by MCT Information Services