Foreclosures Breaking Economic Ladders And Reaching The Top Rungs

June 26th, 2008

So far foreclosures have predated on the lower and middle income but now its insatiable appetite is making it break economic ladders and reaching for the top rungs – the rich and fancy group. Stories about foreclosures becoming fashionable and in vogue in higher income regions are becoming quite common. Exotic mortgages taken by celebrities have been feeding the gossip pages for quite some time but now it has become matter of talk for the general newspapers and media. The upper middle classes are also forfeiting their house to foreclosures. Some are putting up a fight while many are losing their houses.

Many of the foreclosure victims are pointing to many reasons that are beyond their control leading to their foreclosure woes. The main reason is the mortgages melt down, the credit squeeze and increases in the adjustable rate mortgages. This in turn has led to a tumble in the real estate market. To make matters worse has come the increase in fuel and food prices leading to financial stress. It is the perfect cocktail of woes to create the economic storm. But there is more to it than apparently meets the eye.

Analysts opine that foreclosures are not a connected merely to low income and bad credit. CNNMoney.com reported on 5thJune 2008,”more than one million homes re now in foreclosure.” This is the highest record noted. In Newsday a headline shrieked “Foreclosures Taking Hamptons By Surprise” peeping into the havoc wrecked by foreclosures in the inner chambers of the high-income group. One unit on Westhampton Beach, snapped up in the foreclosure tornado is a house that has been mortgaged for $1,100,000 and has a market value of $572,700. Another house in Clover Grass Court of Westhampton has a market value rated at $848,000 but the amount owed to the creditor is $1,270,500. It is the falling real estate market that has been telling on these borrowers. They owe much more than the house is worth. Frequent drawing out of equity has made further complicated matters. Simply put – the borrowers have lived beyond their means.

More stories are pouring in of middle and upper class foreclosure victims descending down the ladder. Some have become homeless. Hitherto they had used houses like ATM cards and frequently milked it of its equity. That foreclosures should follow is but inevitable. There was overconfidence that property prices could never fall. Yet that is exactly what has happened.