When the real estate market’s bubble burst, the first to pay the steep costs were the working class. The trend spread to the middle and upper-middle class and now it seems to have even hit the upper-class. More than one in seven people with home loans exceeding $1 million are delinquent, while only one in 12 people with loans less than $1 million are delinquent according to CoreLogic. While original loans for mortgages less than $1 million have a delinquency rate of 10%, those over $1 million are at a whopping 23%. Of course these are quite possibly second homes or investment homes, but several are the residents of the rich and sometimes famous.
This may not be because they can’t pay, but rather that they don’t want to. Wealthy people are defaulting on mortgages in increasing numbers much of the time on purpose. They are just deciding to walk away from what has become a bad investment. These are called strategic defaults and are growing at alarming rates. Many of the upper-class are not worried about being sued or other consequences including government scare-tactics for doing so. Loan defaults and foreclosures can have devastating and lasting affects on both the economy and local communities. Some of these communities may never recover. This may not concern the wealthy as they have other options that most do not have. They will most likely not have any future ramifications for defaulting. This puts a lot of pressure on the average Joe to try to stay above water and carry the economy forward.
