Total household wealth dropped an estimated $14 trillion during the 2008 financial crisis, and the media largely reported on the financial struggles of the lower and middle class as the markets flooded with foreclosed homes. On a near daily basis, we saw images of stereotypical suburban neighborhoods littered with for sale signs, and locally it was rare to see high value homes foreclosed on.
What's interesting to see, however, is that $750,000+ mortgages were being foreclosed on at a faster rate than the national foreclosure rate from 2008 on. This shows the impact of the crisis was not limited to just those who likely had the majority of their wealth in real estate, but also how the loss of wealth from the collapse impacted those heavily invested in the market.
"Ultimately, the foreclosure rate for $750,000-plus mortgages topped out in May 2012 at 6.8%, almost double the peak of 3.6% that the overall market reached in October 2011. And while both rates declined for the last 2½ years, the upper end of the market continues to see higher foreclosure levels.
What accounts for this role reversal, which runs contrary to the broader U.S. trend of accelerating gains at the top of the income bracket? One key factor, Mr. Khater says, is that the 2008 housing crash was accompanied by a stock-market crash that disproportionately affected wealthier homeowners."
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