IRVINE, Calif., Dec. 4 (UPI) -- Foreclosure activity on luxury homes is on the rise, while foreclosures of modest homes are slowing down, data on the U.S. housing market shows.
Online real estate broker RealtyTrac said Wednesday that foreclosure activity dropped 23 percent from October 2012 to October 2013. Over the same period, foreclosures on homes valued at $5 million or more rose 61 percent, the firm said.
The comparison is not quite apples to apples, RealtyTrac said, as the number of luxury homes with mortgages in distress is "relatively miniscule" compared to the number of modest homes with financial issues. As such, a the percentages change quicker with the smaller number of homes, making a 61 percent gain more dramatic sounding than it might be.
There have been roughly 200 so-called luxury homes with foreclosure notices this year compared to 1.2 million total properties in distress since Jan. 1, RealtyTrac said.
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To a lender, however, a high-end property represents a larger risk. "Each of these high-value homes represents a bigger potential loss for the foreclosing lender compared to a median priced home," RealtyTrac said.
The dynamics of the high-end market are also different, said Emmett Laffey, chief executive officer of Laffey Fine Homes International in New York.
"Any foreclosure properties in this type of ultra-luxury market usually gets purchased very quickly since there is one thing all super rich buyers want: An outstanding deal on a real estate transaction."
Reading between the lines, the markdowns that apply to to homes in distress among luxury homes can be too large to ignore.
"In most cases foreclosures of this magnitude come with several millions more dollars of built-in value," Laffey said.
RealtyTrac said the five top markets for luxury homes in foreclosure were, in descending order, Miami-Fort Lauderdale-Pompano Beach, Fla., Los Angeles-Long Beach-Santa Ana, Calif., Atlanta-Sandy Springs-Marietta, Ga., Orlando-Kissimmee, Fla., and New York-Northern New Jersey-Long Island.
