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Upper End Foreclosures Stacking Up

Last month I posted Are Foreclosures Coming to the Luxury Market? Well apparently they are.

In an article from Housing Wire, Fitch Ratings reported on jumbo mortgages (where the initial principal amount is above the $417,000 conventional loan limit set by Fannie Mae and Freddie Mac. In higher-priced markets the limit is $729,750):

The new year has brought no relief from declining jumbo loan performance. The trend line for delinquencies indicates the 10% level could be reached as early as next month.

1 out of 10 higher-dollar mortgages are delinquent!! And we are starting to see more and more foreclosures in the best of neighborhoods across the country.

As examples:

The Chicago Tribune, in an article on foreclosures, quoted the Woodstock Institute:

Woodstock found that for Chicago, initial foreclosure filings increased by 10.2 percent, but the activity varied widely by neighborhood. Some of the largest percentage gains last year were in Lincoln Park, up 103 percent; Near South Side, up 46 percent; and Near North Side, up 37 percent.

For those not familiar with Chicago, the neighborhoods mentioned are home to some of the highest priced properties in the entire city.

In New Jersey, The Daily Record ran an article titled Foreclosures creep into wealthier areas of Morris in which it reported:

The erosion of home values in Morris County that helped fuel a two-year spike in the number of tax appeals now appears to be influencing a rising number of foreclosure sales in some of the county’s wealthier towns.

While the total number of foreclosure sales scheduled by the Morris County’s Sheriff’s Office last year, 480, was only slightly higher than in 2008, when 468 sales were scheduled, there has been a slight uptick in the number of more expensive homes on the foreclosure lists.

This year 17 foreclosure sales for homes with outstanding judgments of $750,000 or more have been scheduled between January and March, while last year in the same period, 11 such sales were held. At the same time, towns that in the past have seen few foreclosure sales are seeing the numbers grow.

In Chatham and Chatham Township, for example, the county recorded three foreclosures last year, while Homefinder.com now lists 17 in the Chatham’s’ Zip Code.

Mountain Lakes, which had two foreclosures in 2009, has eight pending this year, according to Homefinder.com.

The Mendhams had 3 foreclosures last year and this year has 17 pending.

And lastly, The Valley Sun reported on upper end foreclosures in California:

Regional foreclosure filings surged 63% in 2009, tripling the increases seen in California and the nation as mortgage trouble rippled into previously unaffected areas.

The 3,325 foreclosure filings in Glendale, Burbank, La Crescenta, Montrose and La Cañada Flintridge were up from a total of 2,044 in 2008, according to data prepared for the La Cañada Valley Sun/Glendale News-Press by real estate tracking firm RealtyTrac.

The large increases in filings, compared with California and the nation, indicate that homeowners who previously were able to weather economic hardship struggled with mortgage payments in 2009, said Daren Blomquist, a spokesman for RealtyTrac.

“It seems like forces are spreading to higher-priced markets, as well as they’re spreading because unemployment is very high almost across the board nationwide,” Blomquist said.

While many homeowners may have faced more hardship in 2008, the effects of the economic slide may have set in slower for homeowners in more affluent areas, like La Cañada Flintridge, said Bruce Ackerman, president and chief executive of the Valley Economic Alliance.

“I think the recession is hitting everybody,” Ackerman said. “It’s just taking a little bit longer on some of them. Somebody who’s got a higher income, typically they’re going to have a little bit more in savings so they’re going to have a little bit more staying power, but eventually it’s going to run out.”

Home prices throughout the region are typically higher than other neighboring communities, and many are inhabited by workers with high incomes, but the ripple effect of high unemployment was unavoidable.

What does this all mean?

Pricing on any article is determined by supply and demand. If there is a growing number of distressed properties, which will be discounted in value, coming to the luxury markets across the country, the impact on housing values in even these upper end neighborhoods will be severe.

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