In Boston, Nearly 1 in 20 Households are Millionaires

The Boston Globe ^ | January 1, 2006 | Sasha Talcott

[HostileTerritory]

The number of millionaires living in the Boston area, already one of the wealthiest regions in the United States, will surge 50 percent over the next five years, according to data from two wealth management companies that have studied the issue.

For a city that as recently as 30 years ago struggled with a decaying urban core, the expected influx is one more sign of its dramatic turnaround. By 2009, the number of millionaire households in the region is expected to increase to 88,000, up from 58,000 in 2004.

The projected growth rate parallels the national average. But because Boston starts out with a higher percentage of millionaires in its population -- nearly one in 20 households, more than New York, Chicago, and Los Angeles -- and because the overall population is barely growing, demographic specialists expect more impact here.

The wealth surge will shape the future of the region and the quality of life in Boston, both for future millionaires and those who are nowhere close. Already, businesses catering to the wealthy are flocking to the city: Steakhouse Smith & Wollensky, where the average evening diner spends $72, opened in the Back Bay in 2004. Financial services companies Northern Trust and Bank of New York recently set up new offices here to serve the wealthy, while Bank of America Corp. moved its global wealth and investment management division to Boston.

[HostileTerritory]

A counterpart to the recent articles about Massachusetts' declining population. The economy here is booming, and upper middle class people are doing better than ever. However, middle class families and working class families can't afford homes, and many of them are leaving for the South or West while we draw in childless educated "Cheers" fans from all over the country and immigrants.

[boomop1]

How do they hide it?

[KingKenrod]

That explains a lot...the white liberal guilt must be off the charts in Boston...

[HostileTerritory]

Indeed it is. Some of the zip codes mentioned in this article have very high Democrat voting tendencies, particularly for federal office... although it should be said that a few other well-off suburbs are about the only part of the state that vote regularly Republican, along with Springfield's suburbs and a few towns in the middle of the state.

[Liberty Valance]

The Kerrys and the Kennedys... The people's millionaires

[keithtoo]

When the average house costs $500,000, you will get a large portion of that million just by hanging on to your house and riding the equity wave.

[vbmoneyspender]

Pull-up-the-ladderers.

[mondonico]

When the average house costs $500,000, you will get a large portion of that million just by hanging on to your house and riding the equity wave.

My thought exactly. These are "net worth" millionaire households, right? So that means that the FMV of your residence is counted--a value that is theoretical. IF there is a residential RE bubble, and IF it bursts, I suspect the number of "millionaires" will drop precipitously.

[palmer]

while Bank of America Corp. moved its global wealth and investment management division to Boston

They bought Bank Boston or whatever BayBank turned into. They are definitely catering to the old wealthy geezers in the suburbs. You know, the people who whine about spending $20 a presription but have $500k in savings and owe nothing on their million dollar house. Like to have their egos stroked so BoA has greeters trained to remember names.

[Capt. Tom]

However, middle class families and working class families can't afford homes, and many of them are leaving for the South or West while we draw in childless educated "Cheers" fans from all over the country and immigrants.

Another thing that happens is that house you bought a few years ago for $150,000 on Boston's south shore will now sell for $300,000 plus.

Retired people will sell, pay off the small mortgage(if they even have one) and head south or west with a bundle of cash to the warmer weather and much cheaper housing. And have plenty of money left over to put in the bank or other use.

You don't gain anything by selling and then buying locally since you will pay through the nose for another house in the same town. - Tom

[HostileTerritory]

Certainly that's a factor, but I'm intrigued by the predictions of numbers increasing a lot over the next five years. House prices have stopped rising in Boston and no one expects them to go up like they have been, so this prediction doesn't count on people becoming millionaires from equity. I think that the increased equity means people who owned their homes have more disposable income and can borrow cheaply against their equity. And for as much as housing has inflated, not many homes are actually worth $1 million; it's more likely to see small capes going for $449k and plain colonials asking $750k.

Anecdotally, it sure seems like there are more people making good money in town and the carriage trade is opening its doors to serve them.

[HostileTerritory]

Yes, I'm lucky I bought before the boom began but I'm also paralyzed because trading up means a much bigger mortgage.

[Gay State Conservative]

So that means that the FMV of your residence is counted--a value that is theoretical. IF there is a residential RE bubble, and IF it bursts, I suspect the number of "millionaires" will drop precipitously.

First of all,the assumption that the typical house in the areas mentioned is $500K is incorrect.Anything bigger than a gargle in any of these towns will go for a million or more.

As for the real estate bubble,Boston is seen as one of the most overheated,overvalued markets in the country.Add to that the fact that Greater Boston represents at least 66% of the states population and that Massachusetts is one of three states that is *losing* population and I think it's safe to say that in a few years there'll be far fewer millionaires in the Boston area.

[mtbopfuyn]

Whew, Kerry just made it in considering he's part of a millionaire's household.

[muir_redwoods]

I bought my house outside of Hartford CT in 1983, paid it off in 1999 and now it's worth about 6 or 7 times what I bought it for. In a few years, I hope to sell it and buy two condos, one up north of here and one in the southwest.

If one figures housing equity as part of a retirement plan, make sure it's the housing portion of the retirement plan so that as the market rises or falls your investment and future purchase plan will rise or fall together.

[Gay State Conservative]

And for as much as housing has inflated, not many homes are actually worth $1 million; it's more likely to see small capes going for $449k and plain colonials asking $750k.

Where are you located if I may ask? In the towns/areas specifically mentioned on the map that goes with this piece, colonials start at a million.For example,the house in which I grew up (in Waban) is now assessed by the City of Newton for 1.1 million,which means that it could sell for at least 1.3 This house,while nice and located in a very nice neighborhood,is anything but luxurious!

My Dad paid $34K for that house in the late 50's.

[Supernatural]

One in twenty in Boston are millionaires...and 19 out of those twenty are democrats.

[Radix]

Inflated housing costs and increased equity is likely where these notions come from.

In Massachusetts property taxes are restricted to 2.5% increases each year. The way the tax man has around that is too increase the values, and constantly reassess property.

There are houses in sections of Boston assessed at close to a million dollars, and you'd have to pay me ten times that to ever even consider moving back into that city where I was raised. On the other hand, some folks actually do like it there.

[Pearls Before Swine]

In Massachusetts property taxes are restricted to 2.5% increases each year. The way the tax man has around that is too increase the values, and constantly reassess property.

The valuation is supposed to approximate market value, and with the hot RE market of the last few years, the tax man has done exactly that. The other way, practiced in a number of the well-off suburbs, is to pass over-rides for the "emergency" budget items that seem to crop up more often than not. They usually pass: "Its for the schools -- its for the children and it keeps our property values up." Maybe so, but more efficient use of funds doesn't seem to ever be the preferred solution.

[Go Gordon]

pass over-rides for the "emergency" budget items that seem to crop up more often than not.

With the state's population on the decline, there are less people to pay taxes. The natural trend will be for taxes to continue to escalate, compounding and increasing the exodus.