Foreclosure Bug Bites the Millionaire Market, too

.................................................Marco Island, Fla.
..................................................................$1.05 million
In South Florida, on the Western side of the state, Marco Island is a resort community, filled with beachfront hotels. This four-bedroom, three-and-a-half bathroom home was built in 2004 and has 2,700 square feet of interior space. The red-tiled, Mediterranean-style house also has a backyard pool. It is listed through First Preston.

According to Forbes.com, the foreclosure problem is now starting to affect the very wealthy, and to include many million dollar plus properties in ritzy neighborhoods. It seems that the shady mortgage companies also loaned money for luxury properties to those without the luxury bank accounts.

They used a couple of well-known foreclosure websites, specifically searching for homes and condos for sale that were in any stage of foreclosure, including the REO, or bank-owned listings.

The surprising findings included owners with strong credit scores and qualified in that category, but with excessive loan amounts, little or no money down, and income that could not support the expenditures. Quoting a demographics and housing research company executive, they reported that people with $100K annual incomes were granted million dollar loans. That was obviously not going to fly if the properties had to be held instead of reselling...which of course happened when the market suddenly cooled in 2006.

Humorously, these homes were referred to as McMansions. (McDonalds pocketbooks sporting movie star properties one assumes!)

When property prices jumped so high in 2005, it was a good thing for those who had purchased them the years before and then sold for double and ran with it. But for those who got in too late and BOUGHT at the inflated prices, it presented a real problem. Myrtle Beach real estate had some cases of this, particularly in several of the preconstruction resorts going up at the time. We preached and preached about "getting in early", but there are always those that wait just a little bit too long and miss the boat.

This will happen with Myrtle Beach foreclosures and this buyer's market that exists right now as well.

Too many people are waiting just a little too long, trying to gauge the market to the very last penny...and that is not always prudent. Myrtle Beach condos that are right now at rock bottom prices are going to escalate at least a bit when our vacation season is in full swing, and the deals that are there in February and March will probably be much better than those in June and July.

And we hope that the upward pricing will kick-start the market and prices will continue to rise. The article went on to cite a home in Washington DC that had dropped in equity by $140,000, and with the bank foreclosure pricing, it declined in value by $300,000. That is what hurts the market and further lowers the prices. The more foreclosures that are listed or sell at these below value prices, the more it erroneously causes the statistics on regular housing to appear higher than what consumers are expecting it to be.

Thankfully, banks don't like to drop prices below the loaned amount, or things would be even worse.

Florida has the second highest foreclosure rate in the country, but brokers say that even as it pulls in more traffic from speculators looking for that low price, sellers are refusing to buckle under the pressure and give their properties away. I think that is true with our upscale Pawleys Island real estate market, as well as the high end homes for sale in Myrtle Beach, such as Grande Dunes or some of the waterway mansions. If the owners can afford to sit tight, the market is going to eventually bounce back and not cause such a loss in value for the wealthy as well as the regular residents and vacation home buyers.