A rising number of San Francisco distressed homes in rich enclaves are being returned to lenders or are being abandoned as more high-income families lose substantial portions of their businesses and investments.
One wealthy enclave in San Francisco Bay Area, the Los Altos Hills, was particularly cited in one report in a national newspaper as among affluent communities with fast increasing rate of defaults and foreclosures. The report said that in this community where the home price median is $1.5 million, the five properties posted for foreclosure auction recently had mortgage balances of between $1 million and $2.8 million and that another 16 high-end homes are in serious delinquency as of May.
Analysts said that the Los Altos Hills case is not isolated, as foreclosures in wealthy neighborhoods are becoming more common nationwide. They said that more than 14 percent of residential mortgage borrowers nationwide with loans worth $1 million and above are currently in default. In contrast, only about 8 percent of borrowers with loans worth below $1 million are delinquent.
With an increasing number of San Francisco distressed homes in higher-end communities, prices for these properties are expected to fall further and give better opportunities for investors with plans of buying distressed properties in higher-cost neighborhoods.
Based on findings by a research firm, wealthier investors or homeowners have less scruples about strategically defaulting as they are used to investment strategies and are used to weighing decisions based on their best financial interest. Some analysts even said that the rich are shrewd and they do not care about the impact or the ethical ramifications of strategic defaulting.
Other wealthier Bay Area communities with relatively high default rates are East Bay, which posted notices for 8 million-dollar homes; Nob Hill, which posted four; and Marina, which also posted notices for four high-cost homes.
The more than 72,000 distressed houses in California in May certainly included million-dollar homes, of which a substantial number are San Francisco distressed homes.
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