HIGH-END HOMEOWNERS - A Largely-Ignored Segment, Ripe for Crash?
OBAMA HOUSING RELIEF PLANS DO NOT TARGET THOSE WITH HARD-TO-PAY JUMBO LOANS!
Many don't realize that the slumping housing market, here in Chicago and elsewhere in the U.S., has eaten the accumulated equity of those owning more expensive homes, not just those with more modest priced bungalows.
Here in Chicago, many who owned appraised-out $1MM homes two or three years ago are now finding their homes worth 25 to 30 percent less! And, in many of the more affluent Chicago Neighborhoods - Lincoln Park, The Gold Coast, Lakeview, Hyde Park, and others - high-end housing is the norm, not the exception!
Indeed, many holders of Jumbo Loans - loans of over $417,000 here in the Chicago Area, are underwater. However, these "non-conforming" loans - without government backing - are harder to refinance than their lower-principal brethren. See Nick Timiraos' post in the May 6th Edition of The Wall Street Journal for info, links, and statistics.
At one time, those taking out Jumbo Loans were seen as less risky propositions for banks than those taking out lower, conforming loans. They usually required higher down payments, even during the comparatively-lax mortgage rules during the Real Estate Boom.
In many areas, however, more expensive housing has taken a bigger dollar hit than more modest homes, and those holding Jumbos are encountering negative equity with greater frequency these days.
One big concern, some experts say, is the continued negative equity of these larger, more expensive homes, those highly-leveraged, could quickly increase the dollar volume of home loans in default, even though there are fewer higher-priced homes than those priced more modestly. And such default could destabilize even the most affluent neighborhoods quickly.
DEAN MOSS & DEAN'S TEAM CHICAGO
