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Housing Problem Solvers
Housing Problem Solvers
|Posted on December 14, 2013 at 5:35 PM|
Huge, beautiful homes are a great asset to those who own and live in them, but when tough times hit they are hard to maintain. Although many luxury home owners held on through the housing crisis and kept their mortgages afloat, now an increasing number of luxury homes are going into foreclosure at an increasingly rapid rate. Although overall U.S. foreclosure activity is down 23 percent year-over-year, foreclosure activity on homes $5 million and up is up 61 percent year-over-year, reported RealtyTrac this month.
Of course, this dramatic jump in foreclosure activity affects a far smaller volume of homes than the overall declining number. There are about 200 homes in the U.S. worth more than $5 million that are in foreclosure, compared to 1.2 million total properties presently somewhere in the foreclosure system. However, noted RealtyTrac, “each of these high-value homes represents a much bigger potential loss for the foreclosing lender compared to a median-priced home.” Analysts say that early numbers indicating that these homes were not in foreclosure were likely misleading since lenders probably opted not to begin the foreclosure process on high-dollar homes until they were relatively certain that they could “weather these big-ticket losses.” Laffey Fine Home International CEO Emmett Laffey explained: “Any foreclosure properties in this type of ultra-luxury market usually get purchased very quickly since there is one thing all super-rich buyers want – an outstanding deal on a real estate transaction.” Laffey noted that in today’s market, an ultra-high-end foreclosure usually “comes with several million more dollars of built-in value.”
California and Florida alone account for more than 60 percent of all high-end foreclosure activity so far in 2013. Many analysts speculate that a large number of these homeowners in foreclosure have entered this position deliberately as part of a strategic plan to exit a property no longer worth what is owed on it. While this may be troubling to lenders, their willingness to begin the foreclosure process actually is a good sign for the housing market since it likely indicates that they believe they will be able to recoup their losses on these luxury homes. About a year ago, HousingPredictor published the results of a poll that indicated nearly half of all homeowners would consider walking away from their mortgages if real estate prices continued to slide downward. With high-end home values taking such a beating in many states, it could be the case that these homeowners either have let their mortgages go too long to catch them up or simply do not have the confidence that the banks have that the homes will sell for adequate profit. “Back in 2008, people were very emotion, very scared, in disbelief of denial,” said one analyst, adding that “now they are simply fed up” and may feel “very relieved” after making the decision to default. These sentiments are likely magnified in high-end homes in many cases because of the huge monthly payment commitments and an even higher likelihood that the homeowner considered the home an investment as well as a place to live.
Does this trend in high-end foreclosures surprise you? Have you walked away from any of your loans?