Real Estate Investing

Are you in foreclosure? You’re not the only one. Click here to view a photo gallery of million-dollar homes that are in the foreclosure process. What is the deal?

A recent Forbes magazine article points to a series of unfortunate occurrences. In many cases, the buyers found themselves in a negative equity situation. In other words, they overpaid for the home initially or the house’s value has declined along with the overall housing market, leaving them panicked and seeking an escape. In many cases, housing lenders approved outrageous loans that far surpassed the homeowner’s ability to pay.

“There were people with $100,000 incomes getting million-dollar loans,” Wendell Cox, founder of St. Louis-based housing research firm Demographia, told Forbes.

The situation puts banks in a prickly position. They must either continue paying brokers to maintain, market and sell the properties, or — in light of the surplus of foreclosure properties and the sea of choosy buyers — they must decrease the price and take a financial hit. Forbes reports that sellers in the pre-foreclosure stages are getting some decent offers from international investors, but there is often still no meeting of the minds between buyers and sellers.

This is far from the first time the high-end housing market has experienced trouble, although the problem seems to be more significant now than before. But before we go entirely into the Land of Gloom, take a look at Peter Viles’ real estate blog for the L.A. Times. The blog lists several neighborhoods around Los Angeles where the housing prices have not dropped “one iota.” Granted, they are all sub-million dollar homes, meaning the $700,000 to $900,000 range. Still, not too shabby, right? So here again, there may be local pockets of prosperity amidst the nationwide picture of despair. In any case, if you’ve ever thought about buying a luxury home, now may just be the time.