Number of U.S. millionaire households up by just 2% in 2007 to 9.2 million. Although the number of U.S.-millionaire households reached an all-time high of 9.2 million in 2007, lower stock prices and declining real-estate values damped the pace of wealth creation in 2007, according to a new report by Spectrem Group. The Chicago-based wealth-market research and consulting firm says the number of U.S. households whose net worth -- primary residences aside -- came to at least $1 million increased at a rate of 2% last year, the lowest pace of growth since 2003 when the net increase of U.S. millionaire households was zero.

This compares with millionaire-household growth rates of 8% in 2006, 11% in 2005 and 21% in 2004.

The number of ultra-high-net-worth U.S. households -- by which Spectrem means those with net worths of $5 million or more -- also grew at a rate of 2%, following gains of 23% in 2006 and 26% in 2005.

"The substantial gains in the number of millionaire and Ultra High Net Worth households we've seen since the end of the dot-com bust has all but ground to halt," says Spectrem's president George Walper Jr. "We had already tracked a steady decline in millionaires' investment optimism since mid 2007 on a variety of concerns including a slowing economy, rising energy costs and poor stock-market conditions."

The new data suggests that these "concerns have become a reality for the wealthiest tiers of the U.S. population," adds Walper.

Minimums

Anemic equity-market returns were the main reason for the slowing pace of wealth creation in 2007, according to Tom Wynn, manager of Spectrem's syndicated studies of ultra-high-net-worth and affluent markets.

"We've seen a slowdown in gains in the stock market," says Wynn. "Whenever that happens people on the bubble are going to fall off."

And the sharper decline in the growth rate of ultra-high-net-worth households reflects the fact that this segment has a greater proportion of their wealth in securities, adds Wynn.

The S&P 500 eked out an increase of just 5% in 2007. More alarmingly, however, the last half of the year was characterized by volatility. The broad-market index ended the year 6% down from the all-time high it hit in mid October 2007. (Here though, it may be worth mentioning that the S&P is now about 58% higher than it was in mid March 2003.)

In addition to stock-price fluctuations, Wynn sees falling real-estate values -- which come into play for Spectrem's purposes only in terms of non-primary residences and real-estate investments -- and, as an outrider for now, the possibility of declining enterprise valuations as additional causes of the slowing pace of wealth creation in the U.S.

This trend may result in wealth-management firms lowering -- officially or not -- their minimum-investment or net-worth requirements. "An advisor has a threshold -- it might be $500,000 or $1 million or $5 million or $25 million -- [but] if this trend continues they'll need to re-evaluate these thresholds," says Wynn. -FWR

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