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The mass-affluent, about 33 million households that have investable assets between $100,000 and $1 million, are likely to be squeezed significantly as the real estate market deflates. This group has 37% of their total assets tied up in real estate (23% in principal residences, 14% in investment real estate), according to a new report, “2005 Mass Affluent Investor,” from Spectrem Group.
It’s not surprising that this compares with a much lower total real estate exposure of 21% (13% principal residence, 8% investment real estate) for those with investable assets of $1 million or more.
No doubt, some of those mass affluent are the ones who were sold the interest-only mortgages. That’s why their financial squeeze is only just beginning as interest rates rise.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.