IRVINE, Calif. – Dec. 4, 2013 – Overall U.S. foreclosure activity is down 23 percent year-to-date through October 2013, but foreclosure activity on homes in the $5 million-plus value range is up 61 percent from the same time period in 2012, according to RealtyTrac.
The total 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 represents a much bigger potential loss for the foreclosing lender compared to a median priced home.
The trend doesn’t necessarily mean that more high-end homeowners are in financial trouble. According to RealtyTrac’s analysis, more lenders may now be financially stable enough to comfortably weather some big-ticket losses. In addition, a stronger housing market means even ultra high-end homes could attract more prospective buyers, allowing lenders to recoup more of their losses on the jumbo loans gone bad.
“A home selling for $5 million or above represents the ultra-luxury end of the market, and so far in 2013, we’ve had 34 properties close over that price with the average sale being $7.7 million,” says Emmett Laffey, CEO of Laffey Fine Home International, covering the five boroughs of New York. “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, and in most cases foreclosures of this magnitude come with several million more dollars of built-in value.”
The delayed rise in foreclosure activity on these high-end properties may not all be instigated by the lenders, however. Some of the homeowners may have had the means to hold out against foreclosure longer than other homeowners.
Florida high-end foreclosures
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.
By metro area, South Florida (Miami-Dade through Pompano Beach) landed the No. 1 spot for high-end foreclosures with 47 properties in 2013 – a 488 percent increase since 2012. The Orlando-Kissimmee area ranked third with 12 high-end foreclosures – a 500 percent increase over 2012.
Because a listing price isn’t consistently available on properties in foreclosure, for the purposes of this analysis, RealtyTrac categorized properties into value ranges using three different data points available in its real estate database: estimated amount of outstanding loans on home; estimated market value; and assessed value from the tax assessor. If any of the three amounts was above $5 million, the property was included in the $5 million-plus category.
© 2013 Florida Realtors®