"With more and more dollars allocated toward renovations, upgrades and additions, it is no surprise that property values continue to appreciate," says Jim Gillespie, president and chief executive officer of Coldwell Banker Real Estate Corporation. "The home improvement frenzy is likely a key reason why we are seeing a significant rise in sales of pricier homes."

Coldwell Banker surveyed 300 U.S. homeowners with an income over $100,000 who purchased a house during the last two years valued at over $1 million. The survey was conducted via a series of phone interviews by independent market research firm International Communications Research in March and April of 2005 and commissioned by Coldwell Banker Previews International, the company's luxury division.

Results showed sales of homes in the $3 million plus range grew 35 percent in the first quarter of 2005 compared with the same period in 2004 said Gillespie. "This is in line with the study's findings, as the number of respondents who indicated they purchased a home in excess of $3 million tripled since the initial index in August 2004. The continuing home improvement craze is a boon for the real estate market and a major reason for rapid appreciation," he said.

Homeowners are using tax refunds and home equity loans to fund improvements. Thirty-one percent of those surveyed are planning to expand or remodel their residences in the next 12 months. Of the 36 percent of luxury homeowners who have refinanced or taken out a home equity loan in the last 12 months, 42 percent of them will be using the funds for home improvement or other real estate purposes.

"The affluent American's most valuable asset is his or her home, according to our Luxury Index," Gillespie continues. "Luxury homeowners take great pride in their homes as symbols of their lifestyles and personalities. While these homes are already considered high-end, they are being transformed into more lavish and ultra-comfortable living spaces. In many cases, these affluent homeowners have more than one trophy property for either recreational, entertainment or investment purposes."

There is a growing trend toward the purchase of second homes with 27 percent of those surveyed indicating they already owned a second/vacation property and 17 percent indicating they plan to buy during the coming year. Second homes are primarily being purchased for recreational use rather than for investment purposes.

"These findings contradict the current notion that the affluent are purchasing second homes purely on speculation," notes Gillespie. "Rather, we have found that those homes are being used as recreational properties, as residences for children in college or for investment."

An increase in interest rates is unlikely to affect luxury purchases since only 4 percent said that recent interest rate hikes will greatly impact luxury spending. Another 31 percent indicated they will scale back luxury purchases and 64 percent said it would have no impact.

Gillespie finds the company's Luxury Index a good barometer of the state of the luxury home market and also a reflection of Americans' preferences and attitudes when it comes to their homes.

The survey shows the most popular luxury amenities recently purchased are security systems, gourmet kitchens, topiary/landscaped yards, home theaters, hot tubs and in-ground swimming pools. In addition, 16 percent of the respondents indicated their homes were equipped with bedroom kitchens.

Although the purchase of a car topped the list at 17 percent, several categories relating to the home accounted for 41 percent of the responses, with the purchase of furniture at 11 percent and home remodeling at 9 percent. Boats, yachts and country club memberships were lower on the list when compared with 2004 results.

While 53 percent of luxury homeowners reported that they are currently on a budget, their recent lifestyle and behavior patterns tell a different story. Travel and cosmetic surgery are popular activities of the affluent homeowners. In the past six months, 60 percent of luxury homeowners visited a high-end spa or resort; 46 percent vacationed internationally; 45 percent flew first class on a commercial airline; 17 percent flew on private jet; 11 percent took a cruise; and 4 percent reported having elective cosmetic surgery.

Nearly half (47 percent) of the Coldwell Banker Luxury Index respondents reported an annual household income of $300,000 or more. The largest number of respondents reported a household of four people (27 percent), and a wide range of age groups were represented: under 35 (12 percent); 35-44 (40.9 percent); 45 to 54 (27 percent); 55 to 64 (14 percent); and 65 plus (5.6 percent).