While the numbers are small, less than 200 homes the incidence of foreclosure among ultra-high end homes has skyrocketed recently, even as the rate for average priced homes has plunged. RealtyTrac said today that foreclosure activity on homes valued at $5 million or more has jumped by 61 percent since October 2012 while the overall rate of filings has dropped 23 percent so far this year.
The 200 or so very expensive homes that have received a foreclosure notice this year pales in comparison to the total of 1.2 million homes in less rarified price ranges that have also received notices, but as RealtyTrac points out, each of these homes represents a much bigger potential loss to the lender than do median priced homes.
The company said the uptick in activity may indicate that lenders are now financially stable enough to face the potential big-ticket losses on these homes or it may indicate that they are looking at an improved market for more expensive homes and seeing the possibility of better recoveries through foreclosure.
“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,” said 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.”
RealtyTrac said that the delayed rise in foreclosure activity on these high-end properties may not all be the doing of the lenders. Some of the homeowners may have had the means to hold out against foreclosure longer than most homeowners.
More than 60 percent of the high-end foreclosure activity was not surprisingly in Florida and California. Both states had notable real estate booms and busts and their coastal cities in particular have larger shares of expensive homes than in most of the U.S.
Completed foreclosures in September totaled 51,000 nationwide, down 39 percent from a year earlier when banks repossessed 84,000 homes. CoreLogic said, in its September National Foreclosure Report, that the number of foreclosures last month was virtually identical to that in August.
By way of comparison, CoreLogic said that in what might be considered a more normal market, the period from 2001 to 2006, there were an average of 21,000 foreclosures completed each month. The approximately 4.6 million foreclosures completed in the 60 months since the financial crisis began in September 2008 average 76,700 per month.
In September the foreclosure inventory, that is the number of homes in some stage of foreclosure, stood at approximately 902,000, down one third from 1.4 million one year earlier. The inventory decreased by 3.3 percent from August to September. The inventory in September represented approximately 2.3 percent of mortgages homes in the U.S., down from 3.2 percent in September 2012.
“The foreclosure inventory continues to decline, now standing at an early 2009 level,” said Mark Fleming, chief economist for CoreLogic. “Just over 900,000 properties remain in the inventory, two thirds of them in judicial states where the foreclosure process is typically slower. Consequently, the pace of overall improvement in the inventory will slow down and distressed assets will cast a long shadow over housing markets in states with judicial foreclosure.”
“The number of seriously delinquent mortgages continues to drop across the country at a rapid rate with every state showing year-over-year declines in foreclosure inventory,” said Anand Nallathambi, president and CEO of CoreLogic. “We’re not out of the woods yet, but these are encouraging signs for a return to a healthier housing market in the U.S.”
Five states accounted for almost half of all completed foreclosures over the 12 months ended in September. Florida had 115,000 foreclosures, California 52,000, Texas 43,000, Michigan, 40,000, and Georgia 39,000. The states with the highest foreclosure inventory as a percent of mortgaged homes were Florida (7.4 percent), New Jersey (6.5 percent), New York (4.8 percent), Maine (4.0 percent) and Connecticut (3.7 percent).