Foreclosure tsunami hits high-end homes

A few months ago, one of my columns focused on the tie-in between unemployment in the financial sector and the high-end home market.

As it turned out, my theory that the formerly well-paid employees of giant financial firms had managed to stow away enough assets to withstand long-term unemployment, but after a year of no work would begin to wind down their savings -- with many losing their gorgeous homes -- has, unfortunately, panned out. And on a broader scale than I at first imagined.

I had been thinking too narrowly. It's not just former financial types who have lost well-paying jobs, but others throughout all industries all across the country have done so as well. These formerly well-paid executives are now facing the ultimate personal finance nightmare: a dead-end mortgage situation.

Truthfully, I would like to report otherwise, but recent statistics are bearing out this uncomfortable conclusion: Intransigent unemployment, with many states' jobless rates stuck in double digits, has meant an increasing number of families living in hill-crested, custom, historic, gated, scenic or mansion-like homes will meet the same fate of millions who have lost smaller homes in less manicured neighborhoods.

Stan Humphries, chief economist at Zillow.com, has been parsing foreclosure data and he has noticed an unusual surge in failed mortgages at the top of the market.

Foreclosures over specific price tiers had remained stable until about 2006, Humphries explains, with the bottom tiers of the housing market consistently making up at least 55 percent of all foreclosures, then 29 percent in the middle tiers and 16 percent at the high end. Then, between 2006 and 2009, a tsunami of change occurred, with foreclosures at the high end almost doubling to 30 percent of the market.

"Right now, each of the price tiers are (at) parity, with as many foreclosures coming from the low end of the market as the middle and high end," says Humphries.

What happened?

Before 2006, the reason for the lower end of the market experiencing upwards of 60 percent of the foreclosures had to with the traditional dynamics of failed mortgages -- quite simply, if problems occurred, lower-end homeowners had fewer financial resources to avoid losing the house. At the same time, as Humphries notes, "More affluent homeowners had more resources to navigate household crises that result in foreclosures."

The trouble is, after 12 months of unemployment, homeowners in high-end homes have worked through their considerable assets and now, too, have fewer financial resources to avoid losing a home.

Let's take a look at one market not generally considered a financial center: Dallas-Fort Worth. ...CONTINUED

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