With the luxury home market all but drying up, a number of indicators show that things will probably get worse for those homeowners, as it could for many of the lower end residential owners in America.
Even though some are trying to make it look like the housing crisis is largely over or regular homeowners, in truth there’s no way of proving that at all, as we still have a lot of Alt-A loans floating out there, along with unreported foreclosures by banks to keep their bottom lines looking better. So we’re really in a waiting pattern with no reliable data yet out there that can be counted on.
It doesn’t matter where the wealthy live in the U.S., the luxury home market is largely dead, and homeowners continue to drop their prices in order to get some takers, with very few taking any bites. This of course means the market isn’t close to bottoming out yet, and it won’t for some time into the future as most Realtors concur with.
Another factor is the loss of jobs by those with high earnings; something not reported on that much with most of the focus on the loss of main street jobs. This has put a big crunch on a lot of wealthy people who are struggling as everyone else is.
Having said all that, some of this problem is self-inflicted because high-end homeowners believed they could keep their asking prices on their homes at pre-recession levels, thinking and hoping it wouldn’t last this long and prices would recover in time to get full value. That obviously hasn’t happened, and they’re increasingly having to drop prices, which still isn’t generating much interest, let alone sales.
For those looking for bargain high-end homes in 2010, this will be a buying opportunity, as it looks like sellers must cut prices steeply in order to get buyers to loosen their wallets. Of course they’ll have to do that in reference to banks financing the deals as well, as the higher prices would have to be dropped in order to be considered for a loan. Neither would a smart buyer pay full asking price to subsidize the seller’s lower-valued home, by paying more out of their own pocket in order to buy the home.
Some wealthy communities could really suffer next year if even with slashed home prices they don’t sell. Many would have to walk away from them like everybody else, putting tremendous pressure on the banks which have served that market with loans.
According to data released from First American CoreLogic, the rate wealthy homeowners are getting behind in their mortgage payments is increasing, with almost 10 percent of those with mortgages of over $417,000 behind on payments by 90 days or more. While that’s far below the sub-prime mortgages that are behind by over 90 days, which stand at almost 34 percent, they are increasing at a fast pace.
With the jumbo prime delinquency rate being double what the sub-prime is as far as percentages go, it confirms that all rungs of the economic ladder were living beyond their means.
The wealthy used in this article are defined as those with home values up to $3 million. Those with higher wealth weren’t affected nearly as much, but the larger numbers of those in the problem jumbo loan bracket will cause a lot of problems in 2010.
