U.S. housing crisis also hitting the wealthy

By Nick Carey

HINSDALE, Illinois (Reuters) - Less than a year ago, few people in this affluent Chicago suburb expected the subprime U.S. housing crisis would hit close to home.

"We thought Hinsdale was virtually immune and we wouldn't see any foreclosures, but we have," said Dave Hanna, managing partner of Chicago-based Prudential Preferred CRE and president of the Chicago Association of Realtors. "Nowhere is immune."

With a pretty red-brick downtown lined with stores, good schools and a railway line to nearby Chicago, Hinsdale has been popular among wealthy doctors, lawyers and executives.

It has also seen a 37 percent jump in foreclosure filings this year, according to research firm RealtyTrac, and local data shows the average home sale price has fallen to $1.07 million from $1.15 million in September 2007.

The consequences of years of devil-may-care mortgage lending during the U.S. housing boom were first felt among America's poorer home owners. But if that is where it started, it did not stop there.

"People think this is just a lower-income problem," said Mabel Guzmann, a Century 21 realtor in Chicago. "It's not."

Guzmann was recently called in to try to sell a $1.2 million home in foreclosure, but found it riddled with mold.

"There are few buyers for properties like that," she said.

Along with their less moneyed fellow citizens during the housing boom, many wealthy Americans leveraged their home equity to buy anything from a car to stocks.

"High income does not necessarily mean smart or responsible," said Michael Lefevre, head of the National Association of Mortgage Professionals (NAMP), a trade group.

He argues for financial literacy classes at U.S. high schools.

Now the market is awash with excess properties, depressing prices so much that many Americans owe more than their homes are worth. A sinking U.S. economy and huge job losses -- more than 10 million out of work by December -- have not helped.

Observers forecast it will take the overall market a long time to recover. In the meantime, it could be difficult to sell expensive homes: buyers may find getting a mortgage tough.

"I think it's going to get worse," Lefevre said. "2009 is going to be ugly."

HOUSING HANGOVER