The Irvine-based firm finds increasing foreclosure activity for homes over $5 million in value.<@SM>The greatest amount of $5-million-plus foreclosure activity year-to-date through October occurred in the Miami/Ft. Lauderdale/Pompano Beach, FL, market. Other strong markets included Los Angeles/Long Beach/Santa Ana, CA; Atlanta/Sandy Springs/Marietta, GA; Orlando/Kissimmee, FL; and New York/Nothern New Jersey/Long Island, NY/NJ/PA. ***Chart courtesy of RealtyTrac.


IRVINE, CA-While overall US foreclosure activity is down 23% year-to-date through October 2013, foreclosure activity on homes in the $5 million-plus value range is up 61% from the same time period in 2012, reports RealtyTrac. The number of these ultra-high-end properties with a foreclosure notice in 2013 is relatively miniscule—fewer than 200 compared to 1.2 million total properties in all value ranges with foreclosure notices this year—but each of these high-value homes represents a much bigger potential loss for the foreclosing lender compared to a median-priced home, according to the firm.

The increasing number of foreclosures among ultra-high-end properties may indicate that lenders are at last financially stable enough to more comfortable weather the big-ticket losses that these properties potentially represent. In addition, an improving housing market means more prospective buyers, even for these ultra-high-end homes. A bigger buyer pool translates into higher sales prices on these properties, allowing lenders to recoup more of their losses on these jumbo loans gone bad, reports RealtyTrac.

According to Emmett Laffey, CEO of Laffey Fine Homes International, which covers the five boroughs of New York, “A home selling for $5 million or above represents the ultra-luxury end of the market, and so far in 2013 we’ve had 34 properties close over that price with the average sale being $7.7 million. Any foreclosure properties in this type of ultra-luxury market usually get purchased very quickly since there is one thing all super-rich buyers want—an outstanding deal on a real estate transaction—and in most cases, foreclosures of this magnitude come with several million more dollars of built-in value.”

The delayed rise in foreclosure activity on these high-end properties may not all be instigated by the lenders, however, says RealtyTrac. Some of the homeowners may have had the means to hold out against foreclosure longer than most homeowners.

Florida and California together accounted for more than 60% of all ultra-high-end foreclosure activity so far in 2013, the firm reports. In both states a combination of a severe housing boom and bust over the past seven years along with a plethora of high-value coastal property have resulted in relatively high numbers of high-end foreclosures—although high-end foreclosure activity in California was actually down compared to a year ago.

As reported last week, the number of US residential properties sold rose 2% in October, up 13% from a year ago, yet home sales continued to decrease on an annual basis for the third consecutive month in three bellwether western states: California, Arizona and Nevada, according to RealtyTrac.