Beverly Hills goes vacant
The 90210 crowd are abandoning their underwater mansions in increasing numbers. Is this a bad sign for the rest of the country?
A view of a multi-million dollar home in foreclosure on Rexford Drive in Beverly Hills, California. Some 180 houses in the 90210 zip code have been foreclosed on by lenders, scheduled for auction, or have been served with a default notice, the highest level since the 2008 financial crash.
Jonathan Alcorn/Reuters/File
Reuters reports that more of the Beverly Hills crowd are walking away from their underwater mansions.
Despite most of the mortgages in this tony zip code exceeding $1 million, buyers are walking, not because they have to, but because it makes financial sense.
“It’s a business decision, not an emotional one which it is for normal people,” said Deborah Bremner, owner of the Bremner Group at Coldwell Banker, which specializes in high-end properties in the Los Angeles area. “I go to cocktail parties and all people are talking about is whether it is time to walk away, although they will never be quoted in the real world.”
California is a non-recourse state. So, handing the keys to the lender means “Tha-Tha-Tha-That’s All Folks” as lenders cannot pursue borrowers for deficiencies (the shortfall between what is owed and what the house brings at the foreclosure auction).
Those with jumbo loans are more likely to strategically default. ”Now that these homeowners with jumbo loans are finding out you can do this, more and more are doing strategic foreclosures,“ says Jon Maddux the CEO of YouWalkAway.com. Foreclosures on jumbo loans have increased 579% since 2008, greater than any other form of loan, according to a report by Lender Processing Services, Inc.
Tim Reid writes that a “huge ‘shadow inventory’ is building of elite homes that are in default but have not been put on the market,” as lenders have only put 12 homes up for sale of the 180 total distressed properties in Beverly Hills.
As the saying goes, “So goes California, so goes the nation.”