What do Bear Stearns employees, affluent suburbanites, and members of Congress all have in common? They are finally feeling the same home foreclosure crunch that mainstreet America has felt for the past two years.
It seems as though the mortgage crisis has finally struck a chord with Wall Street. After weeks of bad news of bank closures, falling stock prices, forced federal interventions and emergency congressional actions, America’s most wealthy are at long last starting to understand the problem that has been plaguing American middle class families since mid-2006.
The Financial Times reported that:
Holiday homes have been among the hardest hit. Last year, sales of vacation property fell 31 per cent across the US, against a 10 per cent drop in sales of homes bought to live in, according to the National Association of Realtors…
…One banker said tough times on Wall Street had prompted him to forgo renting a house in the Hamptons for the summer. “They were asking for the same amount of rent as last year, but my financial situation has changed a lot since last year,” he said.
Among those caught in the housing trap are three Bear Stearns executives rushing to offload properties after the collapse of the bank, according to a local estate agent. Their properties, in the village of Bridgehampton, were listed at about $2m, $2.5m and $5m, the broker said. The priciest house has five bedrooms and a large swimming pool with a picnic table built into it. “They are just normal oversized Hamptons homes . . . everyday summer houses for these guys at Bear Stearns,” said a broker. “They hit hard times and decided to cut their losses.”
In some of the country’s most affluent counties, home foreclosures are well above the national average of 1/555. Loudon County, Virginia, for example, has a median family income of $98,000 and a home foreclosure rate of 1/69:
In the Beacon Hill development, a golf course snakes among large houses and gazebos set on rolling hills. Residents keep their horses at an equestrian center. A 7,300-square-foot mansion on Spectacular Bid Place features three chandeliers, a spiral staircase and a state-of-the-art kitchen. The owner offered it at $1.35 million in January 2006, before foreclosing in August 2007. The house found a buyer in January 2008 — for $963,000.
These rich homeowners, previously immune to the national housing crisis, have even resorted to pricey add-ons in an effort to sell their homes.
– A 4,000-square-foot lakefront home in Independence Township, Michigan had languished on the market since last August until the Realtor sweetened the deal by throwing in her 1990 Mercedes 420SEL to the buyer of the house.
– “Seville Homes in Clinton Township, Michigan began tempting home shoppers with choices that include a 52-inch TV, a stove-refrigerator-microwave package, a $2,500 Art Van Furniture gift certificate and free hardwood floors and granite countertops.”
– “In Boston, a condominium developer is asking new owners to help it promote its unsold units, while another is putting in hardwood floors free.
– In Sarasota, Florida, sellers of condos are offering buyers incentives such as exclusive golf-club memberships worth as much as $75,000.
– In Atlanta, the developer of a high-rise is promising shoppers it will pay their first year of condo-association fees.”
These are not your next-door neighbors trying to stay afloat — these are the most privileged homeowners, suddenly falling ill to the same disease plaguing the rest of the country.
Calculated Risk explains that all across the country, the “home ATM” is being closed. The “witch’s brew” — stagnant incomes, rising prices, evaporating wealth and reduced access to credit — which is hitting higher income homeowners in all demographics, is “fostering a fundamental change in attitude and behavior,” economists say.
Roll Call reports that “tumbling share prices for more than a dozen of the most troubled banks and investment houses, which last week continued to write off record numbers of bad loans, may have cost 51 Members as much as $13.2 million in stock value during the past 15 months.” Hopefully lawmakers, finally feeling the heat in their wallets, can get their act with their most recent attempt at assisting struggling homeowners.
A lawyer who works with many GOP Members on their financial disclosure statements said of the lawmakers: “Frankly … these people are economically illiterate. It’s not surprising that nearly 10 percent of lawmakers may be out millions of dollars because of the current credit collapse.”