A new national study by Zillow.com and reported by the Wall Street Journal this week confirms what I have been saying to my clients for months... while the lower end of the housing market got walloped in "round one", it's the high end that's going to take the next big hit.
The Zillow study showed the allocation of foreclosures in markets around the country, breaking the pricing tiers into the bottom, middle, and top based on area median price.
The findings? While higher end homes accounted for just over 10% of foreclosures in 2005, upscale homes will account for 30% of all foreclosure activity nationally in 2009.
And lower end homes, which accounted for 60% of foreclosures nationally (and nearly 80% here in Colorado) in 2005, now account for just under 40% of all foreclosures.
The first wave of losses were driven by subprime loans and easy credit, which primarly attracted buyers who had never been able to obtain credit or financing before. The losses sustained from those loans has caused banks to radically restrict lending practices (call it "risk avoidance"), making it difficult or impossible for higher end buyers to obtain the financing they need to purchase or refinance move up homes.
Call it what you will, but the reality is that round two of the foreclosure crisis is going to weigh most heavily on the upper-middle class. This market remains the most segmented I have seen in many years, with three very different realities for buyers and sellers at the entry-level, mid-level and higher end.
This market calls for a more thoughtful examination than any market in decades, and buyers and sellers need to work with someone who understands what's driving the radical changes taking place.
The quality of your outcomes is going to be based on the quality of your information, and that is why you need serious, professional, and honest representation today.