Listings of foreclosure homes throughout the country are now including more and more high-end homes, based on data from an online real estate research firm.
Approximately 30 percent of all foreclosures in June were expensive homes that belong to the top third in graphs of local home values. This percentage marked a substantial increase from 16 percent in 2006.
Currently, the bottom third in home values account for 35 percent of all foreclosures, a drop from the 55 percent share in 2006.
Analysts observed that foreclosures declined a little early this year, but they increased over the spring, with more high-priced homes in foreclosure listings. The growth in expensive homes being foreclosed was slow in the first months of the year, but in recent months, the pace of foreclosures in the high-end sector has been increasing.
In many areas of the country, housing markets have been showing some signs of recovery as shown in the increase in home prices, decline in foreclosures, increase in home sales and increase in new homes built and sold.
But the continued rise in unemployment and the collapse of many businesses have been hindering recovery and have instead pushed up further the number of homes entering listings of foreclosure homes.
Additionally, the number of foreclosures in higher-cost communities continues to increase, adding pressure to the housing market which is struggling to rise up.
According to reports from the Mortgage Bankers Association, homes purchased with prime loans comprised 58 percent of foreclosure filings in the April to June quarter, an increase from 44 percent during the same quarter last year. Homes bought with subprime loans accounted for around 33 percent of all foreclosure filings in the same quarter, a drop from 50 percent during the same quarter in 2008.
Many prime borrowers also took out risky payment arrangements, similar to the interest-only options taken out by borrowers in the lower-priced home category. These prime borrowers deferred their principal payments, thinking they would be able to refinance just before the scheduled adjustments start.
The sharp decline in home values however blocked all these refinancing plans, making homes bought with interest-only adjustable rate mortgage loans among the category with the highest default rates.
According to Fitch Ratings, 46 percent of option ARMs became delinquent in September, even though only 12 percent of these loans have adjusted to higher rates and monthly payments.
With almost 25 percent of all homes underwater as of the second quarter, more homes are expected to enter listings of foreclosure homes.
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