The Real Deal Miami

Higher-end market suffers, lower end recovers nationwide

December 28, 2009 12:01PM

While the lower end of the market has been buoyed by the first-time homebuyer tax credit, the higher end has continued to experience
distress, with homeowners resorting to short sales and defaulting on
loans. Homeowners with mortgages that exceed $1 million are defaulting
at almost twice the national rate, according to Santa Ana, Calif.-based
research firm First American CoreLogic. According the report, 12
percent of payments on mortgages exceeding $1 million were 90 days or
more overdue in September, compared with 7.4 percent on all U.S.
mortgages. “A lot of wealthy people are upside down in their
mortgages, and they just can’t afford the second or third vacation
home anymore,” Adrian Heyman, owner of Arizona-based real estate
brokerage Property Advisors, said. The financial services sector was hardest
hit by the recession, with employees seeing a 20 percent drop in year-end
bonuses at asset-management firms and insurance companies this year,
according to New York-based consulting firm Johnson Associates. “The
reason the low end stopped falling is because the government stepped
in with affordable loans,” Scott Simon, managing director at
Newport Beach-based investment firm Pacific Investment Management, said.
“There is no political will to bail out a $1 million house.”