StoOgE said:
That is a very good point. These sub prime loans are also middle class, and upper middle class people that could have gotten a nice normal mortgage on a house they could afford. Instead loans for houses outside of their reach were purchased with sub prime mortgages, so someone who could afford a 600K dollar house might have gotten a million dollar home. Someone who could afford a 200K dollar home might have gone for a 450K dollar home and so on.
Trust me, this problem is not because people that cant afford a house were buying 100K dollar houses. That might be part of it, but the much larger losses are going to come from the larger more expensive houses that are also more likely to have devalued over the last 3 years.
There was an article on this on MSNBC today. I'm going to dig it up.
http://www.msnbc.msn.com/id/26869897
The housing crisis that swept through working-class and middle-class communities across the country is now creeping into the leafy driveways and the gated communities of the nation's most exclusive towns.
One symptom of these times: a surge in the number of million-dollar foreclosures. According to RealtyTrac, the number of homes valued at more than $1 million that are in some stage of foreclosure has swelled to 7,968 between January and August. That compares with 4,214 during the same period last year.
The number of $2 million-plus homes in the process of foreclosure has grown even faster, surging to 499 in the year-to-date compared with 201 for the same period last year. Home values are based on comparable, recent sales in the neighborhoods.
It wasn't long ago that bidding wars over luxury properties were commonplace, as buyers emboldened by the booming housing market paid ever-dearer premiums for what seemed like a no-lose investment. More than 64,300 homes priced at $1 million or more sold in 2007, more than triple the number in 2002, according to DataQuick.
"If you've got a lender who pushed them to the limit and you have some change in supply or demand, you'll have foreclosures," says Karl Case, the Wellesley College economist associated with the widely followed S&P/Case-Shiller index of U.S. housing prices. "Loans were unbelievably risky in every category," adds Tom Lawler, a housing economist in Leesburg, Va. "We're seeing the results of that lending in the high end."
Here's a pretty troubling bit that I hadn't thought about:
The wave of expected layoffs at Lehman Brothers Holdings and Merrill Lynch, combined with previous cuts on Wall Street, is likely to worsen conditions in the Northeast, Mr. Case, the economist, predicts.
Some more bits:
Adam Fenn, a Nevada broker who specializes in foreclosures, says he had no million-dollar listings last year. Now he's trying to sell about 20 homes in the $1 million-plus range, and expects to have several priced at more than $2 million in the next month or two.
