NEW YORK (TheStreet) -- In the past month, a 7.64-carat blue diamond sold for more than $8 million, a 48,000-square-foot home in Bel Air, Calif., went for $50 million and Picasso's "Nude, Green Leaves and Bust" painting brought in $106.5 million.
Somebody's spending again.
After hiding out for a year and a half during the recession, the rich have returned. In the first three months of 2010, luxury spending increased more than 20% after diving 20% last year. The
Travel Insights research found that luxury spending in December increased 7% from the same period two years earlier.
In May alone, wealthy patrons put up $40 million for a 1936 Bugatti Type 57SC Atlantic, $32 million for an Andy Warhol self-portrait, nearly $29.5 million for Conan O'Brien's co-op on Central Park West and $5.7 million for a 1944 Patek Philippe 18-karat gold chronograph.
"One thing that's fueling it is a great sense of relief among the high-end consumer that the worst is over," says Gregory Furman, chairman of the Luxury Marketing Council. "Couples in Greenwich, and Cartier, to name a luxury brand, are thinking: 'Phew, we made it through.' "
In the past three years, the nation's affluent and wealthy have grown less impressed with themselves and more happy. According to American Express' 2010 Survey of Affluence and Wealth in America -- which received input from 1,910 respondents with income among the top 10% of all Americans and a mean income of $520,000 a year -- 70% rate themselves as "very happy," compared with 40% in 2007.
Though 94% of affluent Americans believe we're still in a recession, with 60% expecting it to last another year, 75% of respondents say they're succeeding in this economy because of decisions they've made.
Instead of spending on just about everything, luxury consumers have decided to invest in their passions. Car lovers, for instance, make up just 14% of the affluent but comprise more than 40% of automotive spending.
The same holds true for the fashion-forward 9% who closet 39% of all high-end clothing purchases, or the jet-setting 9% who account for 42% of all travel spending. Shopping isn't a splurge to these buyers, but a value-based investment in the tradition and continued heritage of a durable product.
"Before it hit the fan, people were spending for therapy, and now they're spending out of a sense of exuberance and happiness," Furman says. "The psychology of buying is different now."
With the number of affluent and wealthy U.S. households growing this year for the first time since 2007 -- from 10.6 million to 11 million -- fewer luxury spenders are feeling guilty about their purchases (45% this year from 54% in 2009) or about being seen as wealthy (30% from 42%). American Express and the Harrison Group estimate that this will bring an extra $28 billion into the luxury market this year, an increase of 7% from 2009.
The emboldened luxury consumer means an enriched luxury retailer, with
Advisors' SpendingPulse reporting luxury sales up 15.5% in April compared with the same period last year after a 23% jump in March and 15% growth in February.
first-quarter sales jumped 7% and same-store sales increased 12% from 2009. Burberry's sales climbed 7%, while the relatively recession-resistant
Tiffany & Co.
experienced a 22% boost in sales, driven by a 50% gain in Asia.
This doesn't mean retailers have returned to luxury consumers' good graces, however. Despite a renewed focus on customer service during the recession, the Luxury Marketing Council has found that high-end U.S. consumers are largely disenchanted with the level of service provided within the luxury sector.
Complaints range from understaffing to insufficient knowledge of products and their advantages over competing items -- increasingly important as wealthy and affluent customers become connoisseurs of their categories of choice and perform increasing amounts of research. Even consumers who were hardest hit by economic instability still have considerable discretionary income, which retailers should be loathe to leave on the table.
"If you're worth $75 million and lose $30 million, you still have $45 million to play with," Furman says. "You're not exactly impoverished."
-- Reported by Jason Notte in Boston.
Jason Notte is a reporter for TheStreet.com. His writing has appeared in The New York Times, The Huffington Post, Esquire.com, Time Out New York, The Boston Herald, The Boston Phoenix, Metro newspaper and the Colorado Springs Independent.