Multi-million Dollar Foreclosure Homes Enter Market
One thing that comes as a surprise for most Americans is the increase in the number of foreclosure homes, located in the nation’s wealthiest neighborhoods. It would seem that the enduring foreclosure crisis has finally arrived at these affluent zip codes.
According to the date obtained by California-based E-Foreclosuresearch, wealthy places such as La Jolla, Carlsbad and Newport Beach have been recording triple-digit foreclosures. Median home sales in these zip codes are over $700,000.
It is not surprising that the foreclosure hotspots are located in California, one of the states hardest hit by the subprime mess. Carlsbad recorded 302 foreclosure homes; La Jolla has 158 foreclosures and Newport Beach posted 89 homes in some stage of foreclosure.
Most of the repossessed properties are actually second homes owned by wealthy individuals. In addition to these second homes, there were also quite a number of foreclosed vacation houses. The owners were no longer able to afford the mortgage payments for various reasons: bonuses and extra earnings that did not fall through or adjustable rate mortgages with interests that recently reset.
Aside from taking out second loans borrowers could not afford, the relatively high foreclosure rate can be attributed to overvaluation during the last housing boom.
Many buyers, in those times, bought homes that were overpriced. Sellers actually incorporated the expected appreciation values into the price. When the housing market began correcting these prices, the homeowners found themselves with mortgage debts larger than the current value of the property.
Lastly, the growing foreclosure rate in these neighborhoods can also be blamed on speculative activities such as betting that the expensive homes will have ready buyers. This is actually the situation in many California foreclosure hotspots, where second-home buyers tried to win the real estate game but ended up overextending themselves and in some cases, eventually lost the property to foreclosure.