We all knew it was coming, but that does not make things any more palatable. If any luxury real estate agents were wondering where the next big thing in luxury real estate marketing was – it is short sales. Mortgages over $1 million on McMansions across the country are beginning to default faster than the national rate and are already defaulting at twice the national rate.
12% of mortgages over $1 million were 90 days or more overdue in September, compared with 6.3% on loans less than $250,000 and 7.4% on all U.S. mortgages. This data is slightly skewed in that we have already seen somewhere in the region of 20 million foreclosures over the last few years, many of which are still unsold, so it is fair to say that most mortgages likely to default under $250k have already defaulted and gone to foreclosure. Just last year, the rate for defaults over $1 million was less than 5%, but the alt ARMS are now starting to reset and the next 2 years will see substantial defaults.
Luxury short sales are going to be where the action is for the foreseeable future, and it is estimated that at least 25% of all mortgages over $1 million are now underwater. The Fed’s mortgage bailout package does not apply to loans over $729,750, and many are seeing their home values continue to fall. It is difficult to predict exactly where the bottom will be, especially with the new accounting laws allowing financial services firms to value assets in-house and the losses in this sector may possibly out weigh the recent sub prime losses.
Defaults on $1 million+ Mc Mansions exceed national rate
