NEW YORK -- Five years after the housing bubble burst, America's wealthiest families are now losing their homes to foreclosure at a faster rate than the rest of the country -- and many of them are doing so voluntarily.
Over 36,000 homes valued at $1 million or more were foreclosed on -- or at least served with a notice of default -- in 2011, according to data compiled by RealtyTrac, which tracks foreclosures. While that's less than 2 percent of all foreclosures nationwide, it represents a much bigger share of foreclosure activity than in previous years.
"These properties are accounting for a bigger piece of the foreclosure pie," said Daren Blomquist, vice president of RealtyTrac.
Out of all foreclosure activity, the share of foreclosures on properties valued at $1 million or more has risen by 115% since 2007 while the share of multimillion dollar foreclosures -- or homes valued at more than $2 million -- jumped by 273 percent. Meanwhile, the share of foreclosures on mid-range properties valued between $500,000 and $1 million fell by 21 percent.
Until recently, many homeowners at the high end of the housing market were able to postpone the foreclosure process, Blomquist explained. With other assets and alternatives, "they had more financial means to hold out against default."
In addition, lenders are typically more amenable to working with homeowners that have other resources, said Ron Shuffield, president of Esslinger-Wooten-Maxwell, a real-estate firm in Miami where homes priced over $1 million represented 9 percent of all foreclosures last year.
But with a recovery in the housing market still years away, foreclosure has turned out to be a worthwhile option after all. Saddled with bloated mortgages after a long run up in property values, many high-end homeowners have chosen to pursue a "strategic default." Even though they can afford the monthly mortgage payments, they still decide to walk away from their home because they owe more on the property than it is worth.
"In the lower-priced houses you'll see more people defaulting because they can't afford the payments and it's a choice between feeding their family and paying the mortgage on a home that's under water," said Stuart Vener, a national real estate and mortgage expert with the Florida-based Wilshire Holding Group.
"In million-dollar homes, you're looking at people who can afford it, but they have to make a business decision: Does it make sense to make payments on a mortgage when the home is worth less than they owe?" he said. In many cases, it often makes more financial sense to walk away.
At least they can take their time packing up all of their belongings. On average, it takes about 348 days for a foreclosure to be completed, Blomquist said. "They may get almost a year of free housing out of the deal."
But don't expect a few depressed mansions to bring down the neighborhood. A single foreclosure in an otherwise wealthy area is unlikely to impact surrounding values, Blomquist said.
"You're not going to see the weeds growing," Vener added. But there will be an opportunity for buyers to snatch up these impressive houses at bargain basement prices, he said, which could provide a much-needed boost to sales overall. "In a good way, this is going to drive turnover," he said.
Median List Price: $81,700
Total Listings: 22,370
Median Age of Inventory: 70 days
Home Price: $290,000
Sq. Ft.: 2,800
Speaking volumes to the affordability of Detroit housing, not one of Realtor.com's Detroit listings is priced above $1 million.
This $290,000 home is high-end as far as the city's market goes. The apartment, which features waterfront views, dates back to Detroit's heyday when the American automobile industry was firing on all cylinders.
Median List Price: $320,444
Total Listings: 26,858
Median Age of Inventory: 83 days
Home Price: $10.95 million
Sq. Ft.: 13,699
Los Angeles' median home price may tower over the national median (which is below $200,000); but in coming in at No. 3 on our list, that apparently hasn't stopped prospective buyers from scouring the city's listings.
This spanking-new, palatial mansion features floor-to-ceiling windows that display the home's jaw-dropping panoramas for all they're worth.
Median List Price: $221,995
Total Listings: 21,693
Median Age of Inventory: 124 days
Home Price: $4,898,100
Sq. Ft.: N/A
Philadelphia's median home price hovers above the national median by a considerable margin. The city has one of the highest average inventory ages on our list. That may induce more sellers to cut their prices.
Median List Price: $169,500
Total Listings: 17,699
Median Age of Inventory: 69 days
Home Price: $2.75 million
Sq. Ft.: 6,917
Phoenix-Mesa, bringing cheaper than average homes to the home-buying table, is fifth on our list. Perhaps luring flocks of bargain hunters, the area's homes are selling significantly faster than in most cities.
This contemporary has a well-landscaped courtyard and guesthouse. The listing description plays up the home's privacy, which makes the home "feel miles away."
Median List Price: $142,000
Total Listings: 18,827
Median Age of Inventory: 110 days
Home Price: $3,999,999
Sq. Ft.: 6,763
Florida is one of the states hit hardest by the the housing bust with rampant foreclosures driving down home prices all around the state. So it's no surprise that buyers have the Tampa-St. Petersburg-Clearwater area in their crosshairs.
This magnificent waterfront manse sits on some prime Tampa real estate. Price per square foot? $591. While that may strike you as exorbitant, keep in mind, pre-meltdown, this place's value surely dwarfed its current price tag.
Median List Price: $189,900
Total Listings: 16,291
Median Age of Inventory: 94 days
Home Price: $6.495 million
Sq. Ft.: 5,025
Dallas' median home price hovers around the national median, rendering it a fairly affordable city to your average American.
This home, however, is not affordable to your average American -- but, hey, it's fun to look at. The contemporary sits on a one-acre lot that stares out at the Dallas skyline. Recently, the home's price was slashed to $6.49 million.
Median List Price: $121,000
Total Listings: 21,665
Median Age of Inventory: 105 days
Home Price: $8 million
Sq. Ft.: 13,489
Las Vegas took one of the biggest shellackings from the bursting of the real estate bubble, with its median home price plunging by more than 60 percent. It would seem that buyers are keen on taking advantage of the rock-bottom prices.
This massive luxury home almost certainly used to be worth well over $10 million. Now the 13,489-square-foot behemoth is running for $8 million.