Millionaires and Movie stars are losing their houses to foreclosure

High end properties and loans in excess of $750,000 or more are defaulting at a rate of 12.5%, or 1 in 8, according Bloomberg.com. Imagine counting 8 houses in a luxury area and 1 of them will be owned by the bank and as long as the economy is slow expect more to be going to foreclosure. You can buy multimillion dollar properties as cheap as 50 cents on the dollar. For example, a 7 year old waterfront home in Long Boat Key, Florida which is a quiet get away for those like Oprah, Stephen King and Tom Cruise, has a delinquent loan over $6M and the bank wants to dump for $3.5M, the bank is willing to write off 58% of what is owed just to sell it. Why is this? The anti-wealth effect of housing is hitting all income levels and luxury properties which use jumbo loans worth $750,000 or more, are no exception. The types of owners affected range from small business owners who wanted to trade up, to former Fortune 500 execs who have been offered a “retirement package” to even movie stars like Nicolas Cage. Yes even movie stars are having their houses foreclosed upon, Mr. Cage, who seems to be on TV every 30 minutes with his upcoming Disney film “Sorcerer’s Apprentice”, lost his Bel-Air, California home back to the bank last year. In addition to him losing two other properties in New Orleans, LA in 2009, which also went back to the bank after the foreclosure auction. With all of this high end properties going back to the bank, some buyers are coming out of the woodwork to get in these foreclosure luxury properties at great prices. In the Orlando market 34% of the houses which were priced $500,000 or more sold to all cash buyers, during the last 6 months of sales. (Jan 2010-June 2010) In fact, the highest priced house $9,800,000 in the infamous Tiger Wood’s neighborhood of Isleworth, sold to an all cash buyer. The 6 bedroom 7 bathrooms home has over 11,000 s.f. under air, built in 2007, and sold for $7,250,000. This is why cash buyers are coming out they are getting huge discounts for properties and in this case 26% off the price! Most of these buyers are either moving to states where there is no income tax, primarily from the northeast and foreign buyers. Cash is king and these homes are now a part of kingdom.