Contra Costa, California Real Estate

Wendy - I never thought of the upper end suffering in silence but can see how it could happen after reading your post.  What a difficult situation all the way around. 

Susan - it's true we don't think of the luxury market suffering but the luxury homeowner is often self-employed or highly bonused based on company profitability.  The current state of the economy has negatively - and significantly - impacted their income.

Here in Yolo County (also in N. California)  we see the luxury homes sitting on the market forever - there just are not buyers. Particularly poignant are the country estates built around 2005-2006 by successful new home builders - just before the bottom fell out of the new home market and their incomes collapsed.

It is a sad and difficult situation. Also, there really are only so many buyers who can perform in that price range. I know in our own market, the higher-end home owners who are trying to sell also are suffering. Thanks for the sad, but thoughtful post.

Short sale is a much better option, that many don't understand or know much about. KEep doing a good job with your education.

Hi Gordon - a thought regarding the luxury market.....part of the problem is the misunderstanding among buyers (and agents, for that matter) is the luxury financing isn't available.  That is wrong.  Jumbo financing IS available, it just takes more work to find it!

Although the suffering was initially most visible among the lower echelon of the homeowning population, the tide of unemployment (underemployment), lack of financial security, drop in property values...as well as net worth... and the use of toxic mortgage products has caused all the boats in the harbor to drop.  Although the subprime crisis has not fully abated, the prime mortgage crisis has just begun to play out.  Unfortunately there's still a long road ahead.

Wendy folks are struggling with their pride. It's the same pride that got us into this situation in the ifrst place. I've been there done that and know exactly how they feel. Now it's our job to try and reach these people so we can help them salvage some of their credit.

I can definitely echo your findings...here we just had a home that was listed for over $1,000,000 go for about 1/2 that after foreclosure...the owner refused to discuss or work the short sale possibility. Although some people have corporations so they may not personally absorb the damage, many just don't know who to turn to - just like everyone else.

Putting yourself in their position is the key to understand some of the difficulty of this happening.  But once they know their options that has to give some comfort that foreclosure isnt the only road to take.

Wendy helping others to understand their options is such an important part of the service we offer.

This market did not spare anyone but touched every socio-economic class.

This economic market has affected everyone as you have stated in your post. It is a real struggle for most folks for sure.

Asking for help is sometimes the hardest thing in the world - no matter where you live or how much money you have (or don;t).  Good for you for recognizing this reality.

Michael

The economy is such that pain is being felt by so very many and we really do need to help them if we can do so as real estate agents.

The same behavior is seen here in San Diego, way too many upper end homes are just not selling and or they are way over priced and many buyers are waiting for the other shoe to drop so they can purchase these homes for a bargain.

Wendy,

what a eyeopener in an easy to understand blog.  Truth is there is help for these sellers who think because they are at the top end the banks will not consider a short sale.  That is the furthest from the truth!!  I am sure you could help many of these and I hope they reach out to you.

I've found that it doesn't matter what tax bracket you're in.

When I look at my monthly NOD list, I see price ranges in the $1M range and I get frustrated because I know that more than likely, those homes will be the ones to foreclose.

I've done drive-bys and drop-offs to these same groups of people to let them know that they can avoid foreclosure, and I never hear a word back from them.  A few months later, their multi-million dollar home is now being sold for $700K.  All because they did'nt reach out.

How can we help these people?  I've done drive-bys, direct mailings, NOD and still cannot get a response.  I know it hurts these people to think about losing their home, but if they would just talk to a professional, they would definitely learn that there are other options available.

Wow, I wrote this blog immediately before my monthly "date night" with my husband (when real estate gets put on hold for just a few hours) only to have my blackberry go crazy with comments.  Let me say "thank you!" for the feature (!) and your comments!  I promise to respond tomorrow but need to honor date night for the time being. I believe you will all understand.

Enjoy your date night!

It's not surprising the upper end is auffering as well.  There's seems to be less movement in this price range in general. 

And, the fact that these educated, successful people are having troubles with this just underscores how desperately the gneral public needs are knowledge to help them through potential short sales and other options to foreclosure.

The higher end homes here are just starting to show up on the NOD lists, we are a little behind the curve led by Las Vegas in this county - the few foreclosures that have hit the market were sold fairly quickly, a few with multiple offers.

I really enjoyed reading that blog.  It is very sad indeed, many of these professionals are young and striving to have what us older folks have acquired, a nice home to raise a family.  They were sold a bill of goods, ridiculous loans that were doomed to fail.

The stigma of the short sale has to been lifted.  I heard a speaker the other day say that more

home owners need to view their home as an investment, when the investment is no longer serving you, YOU do what a bank does with a poor investment.........get out.

The upper end is probably in worse shape than the average homeowner during these times. Their values can fall much further and the lack of good jumbo financing hinders their potential purchasers.

I'm looking at similar numbers in our little 'burb. In St. Charles, IL there are 67 listings over $1,000,000 and one under contract. Ouch. Guess I'll go look at how many have entered foreclosure proceeding, but the banks are so behind in filing the initial suits it's hard to tell.

My experience... but the higher end homeowners hire Attorneys.. It's amazing how much you can delay something with the right Attorney.

From the desk of David Dee,

Wendy, the upper echelon are not discriminated against in this financial crisis. They do need help and I think some agents are also fearful of approaching these homes because they feel as though it's out of their league so to speak. It can be intimidating to approach them as there tends to be that 'aura' of sophistication among them which make them less approachable. This is far from the truth as the facts you've illustrated clearly outline the abysmal effect it is hitting this upper market.

I think that the issue has less to do with pride and more to do with knowing who to trust.  In an economy driven by consumer spending, it makes no sense to me that real solutions for the consumer don't exist.  The entire focus is on helping big banks and big business.  It's said that there will be three million foreclosures in 2010 alone.  Thats unsustainable for any economy.  Scarey stuff

High end homes are just not moving in our market. Many agents who were used to doing 10-12 high-end sales a year (and call it a day) have been in serious trouble this past year.  The jumbo loan issue looms large for this market. 

Keep Educating them....  This is happening everywhere - especially in the luxury homes because they are to embarressed to ask for help...  We must educate them!!!!!  They are not alone!

It used to be that when I was getting a listing the commission was the hardest part to negotiate. .

Today is the fact that the homeowner is emotionally attached to the house and my job is to end that.

Excellent report Wendy.  I hope you can help each and everyone of them.  Thanks for sharing.

Enjoyed the blog Wendy.

This is sad news indeed. To see people who did the right thing, not doing liar loans and putting 20% down, losing their homes is sad.

Wendy ~ Your absolutely right.  These high end clients are more likely to suffer in silents due to pride amd trying to fix it themselves.  It all relative with any income.  Just because one has more doesn't not mean they don't have bills.  So, when the income drops and the bills keep coming in they are in the same position as anyone else.

Wendy,

 Nice to see you honoring "date night"!! I hope I don't see anyone here staying to comment when they could be on a date with their significant other:) 

 I agree with your post and as some others have mentioned, I believe this is not solely confined to the high end market. I know many people who, even after I have explained everything, still do not make the calls they need to make. So many just give up. I have heard many horror stories about the loan modification program and those types of stories tend to travel faster and louder. Then there is the news media.  The market is going up, no, it's going down. The banks are paying back their taxpayer loans, no, they are hemmoraghing 9 billion (on the news this am...AIG).    All the banks are doing badly, while there top echelon are syphoning millions away..   People are having their homes foreclosed on while they are trying to take steps for either loan modification or short sales.  Short sales are taking months and months for answers!

Who are we to believe?  I can completely understand why people are afraid to take the steps needed. Many are hoping it will just go away, many are in disbelief. And we, as Realtors, certainly cannot guaratee that any of the above things will not happen. I, for one, am very angry.

Did you hit on the nerve center of short sale oaradox. A $150K short sale client is rarely in denial. Where I have the most problems with owners being delusional is in the high end. I think they are so tied into their material things equating to their self worth that they prefer to believe that if they don't think about it then the problem doesn't exist.  

The human side of the economic crisis hits every level of our poplulation.  I cannot imagine the stress that all of these people endure on a daily basis. 

Thank you all for your comments! 

While some comments proposed that people at this level don't reach out due to pride or due to equating self-worth with material things, I think the truth is far more painful.  Lafayette is a great community with a fantastic school district.  The parents cut back on the budget, work harder and hide from the reality that it may not be enough because they don't want to face the fact that they may have to pull their children out of the schools.

Paul Francis suggested that people at this income level hire good attorneys but that is part of the "reaching out" process.  Because this is just now touching the luxury markets, the "good attorneys" currently used by these homeowners have very little experience with loan modifications, short sales, foreclosure and bankruptcy issues.

Wendy:

The Real Estate market is going to see a whole new wave of Foreclosures and Short sales and they are going to be the very clients that you have blogged about...  The "strategic default" will be the next wave to come ie. Borrowers/Sellers that could financially afford to keep their homes but the are so under water with value to mortgage amount they are going to walk away.  You are in a prime market -- Best of luck and keep up the good work... Great blog post -- I hope you turned the BB off during date night -- I always get in trouble for that : ) 

Hi Jason,

Thanks for stopping by and commenting.  I do want to clarify that the two homeowners I referenced are not a "strategic default" in any way.  They don't want to default and they absolutely don't want to walk away. 

P.S. Yes, the BB was turned off!

Wendy - Cari and I see it all over the East Bay.  When touring with the RMA or CCRIM it is apparent that so many higher end homes are under stress.  You are right that most do not want to default or walk away but the situation has gotten dire.  It is sad to see and hear the stories and with most of these folks having been competitive in their lives and work there is still a stigma attached to losing the home. ~Doug

Hi Doug, I think there is also a stigma because the press has been slow to report that most of the current short-sales and foreclosures are not a result of "sub-prime buyers who lied to get their loans." 

Any homeowner that is upside down and in financial trouble is embarrassed and ashamed - whether they be high end or low end. Out "kicking the bricks" in this market and seeing what people are going through is really tough. The best I can do is as a real estate professional is help people come to grips with reality and help them objectively consider their options.

I blog extensively on this subject and I just recently posted about foreclosures beginning to creep into wealthier neighborhoods:

http://foreclosedhomesinchicago.net/142/foreclosures-hit-wealthier-chicago-neighborhoods/

Great post Wendy!  I've seen similar thing happening in the luxury market in Orange County.  I think that once people have "made it" to that level, they feel as if they are already masters of the universe and that there is no one who can help them.  Hopefully those homeowners will open up to the fact that they are not alone in this situation and ask a professional for some help! 

I think it might be an embarrassing time for them, too. You expect short sales in lower to middle class housing, but the higher end homes.... even more embarrassing?

Wendy, it shows that no matter what your income level is things happen. Wheter it is bad money management or illness ot job loss. It doesn't matter. The emotional problems are the same.

What is happening in our economy is a great equalizer, unfortunately.  Democrats and Republicans, high income tax bracket on down.  Doesn't matter on this one.  EVERYONE is silent because they don't know who to turn to.  The government sure isn't here for anyone during this trial and tribulation. How many people that are not in that price range suffer too?  There has not been ONE hearing on the subject.  I blogged this yesterday, and I hope it's okay that I link it.  Too Little, Too Late . . . Short Sale Speculation  Anybody going through this (doesn't matter what amount) is SUFFERING!!

Wendy: I am in the same kind of upwardly mobile community--the Hamptons and even though these are second homes and, maybe because they are second homes---I am seeing the same silent suffering. These are people who have never had a financial issue before in their lives. They owned their own companies and lost them; or they were executives on Wall Street, lost their job and they are moving to their homes here to live--job loss in the financial markets is devastating and as a result we have seen more foreclosures then ever before. Many feel no pain for these "rich" people. But they are no longer "rich"--they have been disembowled so to speak. Read my post just before yours "PRESTO!, CHANGO! YOU ARE HOMELESS!" I have so many comments from members who are seeing first hand how the housing crisis is affecting EVERYONE!  Very important information here on your post--this is actually the "second wave" as I call it. People who are losing their homes now are the middle class and the upper middle class, not the "no-down-payment", "unemployed lay-about" who got a loan in spite of that fact---these are people like you and me and our family members who grew up with the greatest work ethic and responsible money handling ever!!! Just wait until April, when the gov't has ordered the banks to "dump" short sales on the market---watch as the higher end of the market crashes down so far they may never recover---they certainly won't see market appreciation any time soon and thus the great "UNDERWATER" effect. It will affect all of us soon!

I know Lafayette well and grew up in the Diablo Valley and owned a home in Pleasant Hill as an adult. We need to understand that these are not necessarily folks living high and beyond their means. The cost of living is unbelievable. I miss the San Francisco Bay so much but I've been calling Austin home for many years and see no reason to go back except to visit. At first read of your blog I thought perhaps like many that buying a modest multi million dollar home (by some standards) with an interest only loan is insane.....but I blame the mortgage industry for getting owners into this mess and encouraging the false inflation of values. Perhaps the California disaster is reason for the projection for Austin growth to be 86% in the next 15 years. Please don't misunderstand my comments because I do truly love northern CA but the balance sheet just wasn't working for me there. It truly does hurt to abandon your home state.

This is a huge issue...I would say the inaction in the luxury segment is a difficulty experienced globally.