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Million-dollar foreclosures rise as rich walk away

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    Million-dollar foreclosures rise as rich walk away

    February 23, 2012

    NEW YORK (CNNMoney) -- Five years after the housing bubble burst, America's wealthiest families are now losing their homes to foreclosure at a faster rate than the rest of the country -- and many of them are doing so voluntarily.

    Over 36,000 homes valued at $1 million or more were foreclosed on -- or at least served with a notice of default -- in 2011, according to data compiled by RealtyTrac, which tracks foreclosures. While that's less than 2% of all foreclosures nationwide, it represents a much bigger share of foreclosure activity than in previous years.

    "These properties are accounting for a bigger piece of the foreclosure pie," said Daren Blomquist, vice president of RealtyTrac.

    Out of all foreclosure activity, the share of foreclosures on properties valued at $1 million or more has risen by 115% since 2007 while the share of multi-million dollar foreclosures -- or homes valued at more than $2 million -- jumped by 273%. Meanwhile, the share of foreclosures on mid-range properties valued between $500,000 and $1 million fell by 21%.

    Until recently, many homeowners at the high end of the housing market were able to postpone the foreclosure process, Blomquist explained. With other assets and alternatives, "they had more financial means to hold out against default."

    In addition, lenders are typically more amenable to working with homeowners that have other resources, said Ron Shuffield, president of Esslinger-Wooten-Maxwell, a real-estate firm in Miami where homes priced over $1 million represented 9% of all foreclosures last year.

    But with a recovery in the housing market still years away, foreclosure has turned out to be a worthwhile option after all. Saddled with bloated mortgages after a long run up in property values, many high-end homeowners have chosen to pursue a "strategic default." Even though they can afford the monthly mortgage payments, they still decide to walk away from their home because they owe more on the property than it is worth.

    "In the lower-priced houses you'll see more people defaulting because they can't afford the payments and it's a choice between feeding their family and paying the mortgage on a home that's under water," said Stuart Vener, a national real estate and mortgage expert with the Florida-based Wilshire Holding Group.

    "In million-dollar homes, you're looking at people who can afford it, but they have to make a business decision: Does it make sense to make payments on a mortgage when the home is worth less than they owe?" he said. In many cases, it often makes more financial sense to walk away.

    At least they can take their time packing up all of their belongings. On average, it takes about 348 days for a foreclosure to be completed, Blomquist said. "They may get almost a year of free housing out of the deal."

    But don't expect a few depressed mansions to bring down the neighborhood. A single foreclosure in an otherwise wealthy area is unlikely to impact surrounding values, Blomquist said.

    "You're not going to see the weeds growing," Vener added. But there will be an opportunity for buyers to snatch up these impressive houses at bargain basement prices, he said, which could provide a much-needed boost to sales overall. "In a good way, this is going to drive turnover," he said.

    Five years after the housing bubble burst, America's wealthiest families are now losing their homes to foreclosure at a much faster rate than the rest of the country -- and many of them are doing so voluntarily.
    Last edited by AngelinaCat; 02-24-2012, 11:47 AM. Reason: To bring post in line with the very specific formatting rules for this board.

    #2
    "Million-dollar foreclosures rise as rich walk away"



    I personally don't really consider these people rich. I like to refer to them as poor people with money but the money is no more.

    The real rich know how not to lose their homes.
    The essence of freedom is the proper limitation of Government

    Comment


      #3
      I don't know how they come up with the classification of "rich" either. I suppose I was "property" rich and cash poor at one point. I would never consider myself rich and I have owned over $1,000,000 in property at one point in 2006.

      They are also skewing "notice of defaults" with actual foreclosure judgments. It is quite possible that these so-called "rich" are leveraging the default with obtaining a modification. What's the "actual" foreclosure rate... they don't know.

      "In million-dollar homes, you're looking at people who can afford it, but they have to make a business decision: Does it make sense to make payments on a mortgage when the home is worth less than they owe?"
      Really? How does he know this? I couldn't afford it. LOL Especially when my tenants stopped paying their rent.

      Interesting article nontheless.
      Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
      Status: (Auto) Discharged and Closed! 5/10
      Visit My BKForum Blog: justbroke's Blog

      Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

      Comment


        #4
        In NJ a million dollar home doesn't necessarily mean "rich".
        Homes on my blue collar block can go for half that in a good market.

        Keep On Smilin'

        Comment


          #5
          Originally posted by keepsmiling View Post
          In NJ a million dollar home doesn't necessarily mean "rich".
          Homes on my blue collar block can go for half that in a good market.
          Exactly.

          Regardless, the article is somewhat interesting. I found that the rich, in Florida, don't lose their homes to foreclosure. In fact, many people in my neighborhood, with $500K-$900K homes, actually own their homes outright. I would still not consider my neighborhood "rich". I would, though, equate that the truly rich in Florida own their properties outright with no mortgage or liens.
          Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
          Status: (Auto) Discharged and Closed! 5/10
          Visit My BKForum Blog: justbroke's Blog

          Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

          Comment


            #6
            I agree. Rich people are not in debt and usually have full ownership of their material possessions.

            With money to spare..........
            Filed July 2009. Discharged 08/08/2014. Awaiting closing. We made it !!!! Woo-hoo!

            Comment


              #7
              Originally posted by andy158 View Post
              I agree. Rich people are not in debt and usually have full ownership of their material possessions.

              With money to spare..........


              Exactly. Rich people however do get into debt but they borrow money at low interest rates and buy real assets with it such as a business or real estate that provides income and then they pay the loans back with cheaper devalued dollars.

              They just don't run out and buy over priced homes and cars with debt since these things lose value over time.
              The essence of freedom is the proper limitation of Government

              Comment

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