Dec072013

High End Foreclosures are getting their due

High-end properties were once immune to foreclosures.  These loanowners had little fear, compared to a loanowner in the Inland Empire that had a much greater chance of a foreclosure action by the bank.  This recent change in bank foreclosure policy is an indication of confidence by the banks that the cloud inventory is now completely under control, at least for the time being.

HIGH-END FORECLOSURES UP 61 PERCENT YEAR-TO-DATE IN 2013

Overall U.S. foreclosure activity is down 23 percent year-to-date through October 2013, but foreclosure activity on properties in the $5 million-plus value range is up 61 percent from the same time period in 2012.

Defaults in that range were infamous, however defaults in that range they seem to rarely materialize into foreclosures.  Beverly Hills was city that had a lot of pre-foreclosures, but nothing would hit the market. This has be documented many times by Dr. Housingbubble.  And Irvine Renter recently posted about the desirability of that part of Los Angeles.

The number of these ultra high-end properties with a foreclosure notice in 2013 is relatively miniscule — fewer than 200 compared to 1.2 million total properties in all value ranges with foreclosure notices this year — but each of these high-value properties represents a much bigger potential loss for the foreclosing lender compared to a median priced property.

This type of high-end foreclosure has happened before in the initial stages of the housing bubble.  Remember this unfinished mansion in Newport Beach, the owners initials were JM?  However, it seems the $1 million plus foreclosure pace has picked up. over the last 12 months.

The delayed rise in foreclosure activity on these high-end properties may not all be instigated by the lenders, however. Some of the owners may have had the means to hold out against foreclosure longer than most owners.

The following slideshow features 9 ultra high-end homes in some stage of foreclosure, and below the slideshow are links to view the full details of these homes on RealtyTrac.

Here is the link to the slideshow here.

Not surprisingly Florida and California together accounted for more than 60 percent of all ultra high-end foreclosure activity so far in 2013. In both states a combination of a severe housing boom and bust over the past seven years along with a plethora of high-value coastal property, have resulted in relatively high numbers of high-end foreclosures — although high-end foreclosure activity in California was actually down compared to a year ago.

I believe the bottom line here is that banks have completed the learning curve with regard to managing their foreclosures.  They have become very adept at managing inventory and these new high end foreclosures reflect their new confidence. Gone are the days banks use to hide their foreclosures and show an perception of perfection.  Now it’s can-kicking and inventory management with little shame.

Mike