Anecdotally, a lot of the foreclosures that I have seen of late involve people who made the ill-advised decision to become real estate moguls. These are people who leveraged themselves more than I would have thought possible in order to buy properties, fix them up and sell them for profit a few months later.
As the economy slumped, private investors got cold feet and starting calling loans or denying new funding. Suddenly these people found themselves in possession of a number of different half-developed properties. They had huge loans that suddenly became due and were faced with a market that wasn't exactly falling all over itself to take on the risk buying half-finished properties.
Falling property values have had a big effect as well. In one particular case, an upper-end townhouse project dropped in appraised value by about 12% between October 2008 and February 2009.
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