If it's good to be king, it's not bad to be rich, especially when faced with foreclosure.
Borrowers in default with loans worth $1 million or more are able to stay in their homes for an average of about six months longer than defaulting borrowers with loans that are less than $250,000, according to data from Lending Processing Services analyzed by the Wall Street Journal. One of the biggest reasons for the time gap: smaller mortgages are more likely to be packaged and sold into securities backed by Fannie and Freddie, which have strict foreclosure timelines.
The discrepancy once again highlights how the rules differ for those at the top of the housing market. In fact, in areas ranging from booming Silicon Valley to the slowly-recovering Detroit metro area, the market for high-end homes is growing. At the same time, home prices in 20 U.S. cities dropped in December, according to the Case-Shiller Home Price Index.
There are a variety of reasons for the boost in the high-end housing market. In the Detroit-area, buyers looking in the $250,000 to $750,000 range snapped up homes at a rate of double digit growth because those buyers could easily qualify for mortgages and because they were grabbing homes at a huge discount, the Detroit News reports. In Silicon Valley, booming tech companies have created overnight millionaires who have cash to spend on expensive homes, according to the Bay Citizen.
And some luxury markets are being propped up from the outside in a way that would be impossible for the rest of the housing market, maybe best exemplified by the super-rich Russians buying up expensive properties across the U.S., according to Businessweek. The reason, by the way? It's in large part to show them off as status symbols.
Although it takes them longer to reach the end of an individual process, the rich are becoming more familiar with the national foreclosure crisis. Indeed, foreclosures on homes worth at least $2 million account for a larger share of foreclosures nationwide than in previous years, according to CNNMoney. Even in enclaves like Beverly Hills, which many associate with the super-rich, homeowners in default are walking away from their properties. But for some, the reason has little to do with financial distress. Instead, it's just a savvy business move.