2013 foreclosures of homes worth $5 million+ jumped 61% year-over-year

If you have clients reading headlines like the one above and asking, “What’s going on?”  Here’s some information you may find helpful.

High end foreclosures may be one of the last shoes to drop as the housing market recovers.  But it’s important to keep the increase in perspective.  The recent uptick in the percentage of home foreclosures at the $5 million and above price point is not so shocking when you realize we are referencing a total of about 200 high end foreclosure notices in 2013 (through October), as opposed to more than a million in other price ranges.

Why the rise in high end foreclosures this late in the game?  There are a number of possible reasons.  Owners of expensive homes may have had the resources to hang on longer.  Lenders may have chosen to deal with properties representing smaller losses before taking bigger hits on high end homes.  Lenders may also have been waiting to act on luxury short sales and foreclosures until the luxury niche entered a solid recovery mode in most markets, as it has today.

All in all, while high end foreclosures are certainly difficult for the homeowners, they may be an indication that we are working though the final backlog of distressed properties.  That bodes well for the luxury niche.