The rich quickly dump investments that go sour.


By DAVID STREITFELD

LOS ALTOS, California - The housing bust that began among the working class in remote subdivisions and quickly progressed to the suburban middle class is striking the upper class in privileged neighborhoods like this one in Silicon Valley. Whether it is their primary residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.

More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

By contrast, homeowners with less lavish housing are much more likely to keep up. About one in 12 mortgages below the million-dollar mark are delinquent.

The CoreLogic data suggest that many of the wealthy are purposely dumping their financially draining properties, just as they would a sour investment.

“The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist.

Five properties here in Los Altos were scheduled for foreclosure auctions in a recent issue of The Los Altos Town Crier, the weekly newspaper where local legal notices are posted. Four have unpaid mortgage debt of more than $1 million, with the highest amount $2.8 million.

In Las Vegas, Ken Lowman, a longtime agent for luxury properties, said 4 of the 11 sales he brokered in June were distressed properties.

“I’ve never seen the wealthy hit like this before,” Mr. Lowman said. “They made their plans based on the best of all possible scenarios ? that their incomes would continue to grow, that real estate would never drop. Not many had a plan B.”

The defaulting owners, he said, often remain as long as they can, he said. “They’re in denial.”

In Los Altos, where the median home price of $1.5 million makes it one of the most exclusive towns in the United States, several houses that had been scheduled for auction recently were still occupied .

The people who answered the door were reluctant to explain their circumstances. Lenders are fearful that many of the 11 million or so homeowners who owe more than their house is worth will walk away from them, especially if the real estate market begins to weaken again.

“Those with high net worth have other resources to lean on if they get in trouble,” said Mr. Khater, the analyst. “If they’re going delinquent faster than anyone else, that tells me they are doing so willingly.”

The vast majority of owners in upscale communities are still paying the mortgage, of course. But they appear to be cutting back in other ways. The once-thriving Los Altos downtown is pocked with more than a dozen empty storefronts in a sixblock stretch.

In the middle of a workday, one troubled homeowner here leaned over his laptop at the kitchen table, trying to maneuver his way out from under his debt . His five-bedroom house, drained of hundreds of thousands of dollars of equity over the last 13 years, was scheduled for auction . Last year, after his latest business (he has had several) failed in what he called “the global meltdown,” the man, a technology entrepreneur, said he quit making his $9,000 monthly payments.

“I’m going to be downsizing,” he said.