Amid signs that the runaway real estate market is slowing down, the majority of wealthy Americans remain optimistic that their homes will continue to appreciate in value, according to survey findings released today by The PNC Financial Services Group, Inc. (NYSE: PNC). Sixty-five percent of those surveyed said they expect to see double-digit increases in the value of their primary homes over the next five years, with nearly one-third (31 percent) anticipating an increase of 20 percent or more.

"Our findings indicate that many among the wealthy will not believe there is a real estate slowdown until they see it reflected in their property values, especially in regions of the country where prices have skyrocketed during the past five years," said Nicholas Buss, Ph.D., senior vice president and PNC's real estate economist.

He added: "As an investment, real estate has been an increasingly dominant asset class over the past five years. The party may be over for those who have been 'flipping' houses and using real estate to get rich quick. But, in general, established wealthy Americans have not been speculative buyers and they remain solidly confident in the long-term value of their real estate holdings."

The results released today by PNC are the first in a series of reports resulting from a nationwide survey of nearly 1,500 wealthy individuals to identify attitudes about wealth among high net worth individuals, how it affects their lives, and their needs in managing wealth. Other highlights of the real estate findings include:

  - Fewer than one in 10 (seven percent) wealthy Americans overall expects
    any decline in the value of their primary homes over the next five
    years.

  - Only about one in five (22 percent) wealthy Americans counts real estate
    as one of their principal sources of wealth.  Those who do, clearly
    recognize the importance of real estate to their financial health, with
    39 percent of them saying a "major decline" in home values would be a
    threat or huge threat to their family's wealth. Residential real estate
    is far more likely to be listed as a source of wealth by those under age
    65 (26 percent) or those with less than $1 million in liquid assets (30
    percent).

  - There are significant regional differences in home price expectations.
    Floridians are the most bullish while New Yorkers and New Englanders are
    the most bearish. Californians are closer to national norms in their
    outlook.

  Regional Differences

The PNC survey found significant regional differences in real estate outlook. In general, those living in the southern and western parts of the United States were more likely to expect an increase in the value of their real estate than Northeasterners. More detailed findings include:

  - New Englanders had the most conservative expectations for ongoing rising
    home values, with one in 10 respondents expecting a 20 percent or more
    increase in home prices over the next five years and 18 percent
    expecting a decline.  Nearly twice as many New Yorkers (19 percent)
    expect an increase of 20 percent or more, and an almost equal number
    (20 percent) expect a decline.

  - California respondents had higher expectations with approximately one-
    third (37 percent) expecting a 20 percent or more increase and only 8
    percent expecting any decline.

  - Florida: in a state where property values have soared, half of the
    respondents expect the value of their primary residence to increase by
    more than 20 percent over the next five years, making them twice as
    bullish on real estate as all respondents compared to respondents in
    other states (28 percent outside of Florida expect a 20 percent or more
    increase).

  Economic Consequences of Downturn

When asked what changes, if any, they would make if housing prices were to drop by 20 percent or more in the next 2-4 years, only one in five survey respondents (22 percent) strongly or somewhat agreed that they would make lifestyle changes to reduce household expenses, while more than half (55 percent) report they would not delay major purchases to offset the decline. These results, according to Buss, may have positive economic consequences. "In recent years, rising housing prices have lifted consumer confidence and boosted consumer spending, but it does not appear that declining prices will dampen that confidence, at least among the affluent," he said.

In a nod to thrift, those with $500,000-$999,000 were most likely to make lifestyle changes to reduce expenses if real estate values fell by 20 percent or more.

Homes Away from Home

Of the 32 percent of wealthy Americans who own a second vacation home or condo, half say they purchased within the past five years. Nearly two-thirds (63 percent) note they purchased their second home simply for their ongoing personal use. Only 19 percent said they bought property as an investment.

Another one-quarter (24 percent) of survey respondents indicated they own real estate as residential rental property. New Englanders (43 percent) were much more likely to own a second/vacation home than the rest of the country (23 percent), with most second/vacation homes and condos owned for longer than five years. Californians were much more likely to own residential rental properties.

Among those who said residential real estate is a major source of financial assets, rental properties were the most common form of ownership, whereas timeshares, vacation condos and commercial real estate were less common.

Survey Methodology

These real estate results are the first in a series of findings from the PNC Financial Services Group's wealth and values survey. The survey was conducted by Harris Interactive online this fall among a nationwide cross section of 1,485 adults (age 18 or over) with annual incomes of $150,000 or above (if employed), at least $500,000 of investable assets (if employed) or at least $1 million of investable assets (if retired). The total sample contains four distinct groups: 795 with assets of $500,000 to $999,999; 465 with assets of $1 million to $4.9 million; 109 with assets of $5 million to $9.9 million; and, 116 with assets of $10 million or more. Figures for age, sex, race, education, region, income, asset level and propensity to be online were weighted where necessary to bring them into line with the actual proportions in the population. Overall results have a sampling error of +/- 2.5 percentage points, and sampling error for results from regional sub- samples and asset groups is higher and varies.

The wealth and values survey was designed and managed by HNW, Inc. (www.hnw.com), a leading provider of wealth marketing software and solutions to financial services companies and intermediaries seeking to capture and serve the high net worth market.

Harris Interactive Inc. (www.harrisinteractive.com), based in Rochester, New York, is the 13th largest and the fastest-growing market research firm in the world, most widely known for The Harris Poll® and for its pioneering leadership in the online market research industry. Long recognized by its clients for delivering insights that enable confident business decisions, the Company blends the science of innovative research with the art of strategic consulting to deliver knowledge that leads to measurable and enduring value.

The PNC Financial Services Group, Inc. is one of the nation's largest diversified financial services organizations providing consumer and business banking; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management; asset management and global fund services.

This report has been prepared for general informational purposes only and is not intended as specific advice or recommendations. Information has been gathered from third party sources and has not been independently verified or accepted by The PNC Financial Services Group, Inc. The PNC Financial Services Group, Inc. makes no representations or warranties as to the accuracy or completeness of the information, assumptions, analyses or conclusions presented in the report. The PNC Financial Services Group, Inc. cannot be held responsible for any errors or misrepresentations contained in the report or in the information gathered from third party sources. Any reliance upon the information provided in the report is solely and exclusively at your own risk.

SOURCE: The PNC Financial Services Group, Inc.

CONTACT: Amy Vargo of The PNC Financial Services Group, +1-412-762-1535,
or amy.vargo@pnc.com; or Connie Hubbell of The Hubbell Group, Inc.,
+1-781-878-8882, or Hubbell@hubbellgroup.com

Web site: http://www.pnc.com/
http://www.hnw.com/
http://www.harrisinteractive.com/

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