Mansion Foreclosures Surge
June 29, 2010, 11:14 AM ET
For those who think all is well again in the world of Richistan, consider the following statistic
The percentage of $1 million-plus loans more than 90 days delinquent rose to 13.3% in February, half again as high as the 8.6% overall delinquency rate, according to First American CoreLogic, which tracks U.S. real estate and mortgages.
The statistic, from this Reuters article, points to a sobering reality amid the happy talk of newly minted millionaires.
Many affluent and wealthy can’t keep up with their mortgage payments.
Last month, there were 205 foreclosure filings for mortgages of $5 million or more, the third straight month such filings rose, according to RealtyTrac. The 205 foreclosures totaled $813 million.
“Early on in the crash, the weakness was in the lower-price tiers. In the past year, most of the biggest price declines have been in the upper tiers,” Mark Zandi, chief economist of Moody’s Analytics, told Reuters. “That suggests high-end households are coming under increasing pressure.”
Lenders to the wealthy are taking a hit. Bank of America’s U.S. Trust unit reported a nearly sixfold increase in its loan-loss provision in the first quarter, to $184 million from $31 million a year earlier. Net charge-offs at Northern Trust rose to $31 million from $2.7 million a year earlier, though they were down from the 2009 fourth quarter, according to Reuters.
While some say the weakness at the top is part of every economic cycle, real-estate experts say the mansion market has rarely if ever been hit so hard.
“This recession is unlike prior recessions. It hit the high end just as much as the low end,” said Sam Khater, senior economist at CoreLogic.
Of course, the foreclosures could be the result of over-leveraged speculators and developers as opposed to once-wealthy families. Or it could be the result of a poor stock market in 2010, along with higher taxes.
Why do you think the mansion market is getting hit so hard even as the finances of the wealthy are reported to be improving?
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