Losing $100k in home equity

[Aurel]

As some of you know, I relocated to New Mexico in April, leaving temporarily my familly in our NJ home that we are trying to sell. We bought it for $505k in 2007,with $180k down payment, thanks to the excellent sale of my previous home. We first listed it for $465k, got few showings and only one low ball offer of $375k. Then lowered it to $449k, still a few showings, no offers, then to $435k, same story.

We have come to the sad reality that if we ever wan to sell and move on with our life, it will have to be in the low $400s...the real estate market is really that bad. That is leaving $100k of home equity on the table, thanks to all the foreclosures and irresponsible lenders and borrowers who crashed the market.

To be honest, we probably over gained on the previous home, and this was just paper money, but it still sucks. The alternative would be to rent, but then we cannot buy another home, and have to deal with all the hassle of being landlords.

I wonder what the braintrust would do in my position...Take the loss and move on, try to sell for a year, rent...In the mean time, we live 2000 miles away and that is not healthy at all. We love this house and it hurts having to give it away,
but losing the job and being unemployed would have been worse, so...I just hope we still walk away with $80-90k.

[billybek]

I remember back in the early 80s people selling their homes for $1. Calgary's economy was in the dumper and thousands of people walked away from high interest mortgages after the housing market gobbled up what little equity they had in their homes.
Sucks. Can you wait it out?

[1979 930]

Put a match to it!!!

[Aurel]

Originally Posted by billybek

...Can you wait it out?

It may take many years for the RE market to become healthy again. The way I see it, it is a wash. If I can sell now, I will just buy another house that was worth $500k in 2007, for $350k now...

[Aurel]

Originally Posted by 1979 930

Put a match to it!!!

I thought about that , but the insurance only reimburses the building value, not the land...

[surflvr911sc]

Hello? Welcome to the party!

[chocolatelab]

First things first. Get the family out where you are.

Second, find the best mortgage broker in your area. Find out what it takes to buy a new house with your 2 scenarios. First 1 being short sale. 2nd being holding it as rental property.

Third, put that sucker on the rental market. Whether its empty or rented you are paying the mortgage (I hope). Rental rates look like they are rising as more and more folks are getting bounced from their homes.

20 years from now if you decided to keep it-I have a feeling you are going to be in a real good position on that property.

Example: We rented out our primary residence and moved to a rental in a new location. It took 8 months but have loan approval if I want to buy another. I think I may still sit and watch the market.

[island911]

This just in... housing costs money.

That is, get over the idea that housing is always a gain. . .break the ubiquitous notion that not only can you live somewhere for free, but you always make money too.

You can try to wait for wage inflation to buoy housing prices back up. But that might be a while and servicing the loan and maintenance may cost more than you would lose now.

I don't have a crystal ball, but do notice that banks seem to think that big (wage) inflation is a long ways out. (judging by the lending rates)

[Aurel]

Maybe I should sell it, eat my loss and invest the remaining equity in gold, rent for a while...gold seems to keep going up.

[chocolatelab]

nice house by the way. Have you looked at refinancing the home? Not sure what your rate is but you can get 30 year fixed for mid 4% right now.

[Aurel]

Originally Posted by chocolatelab

nice house by the way. Have you looked at refinancing the home? Not sure what your rate is but you can get 30 year fixed for mid 4% right now.

I am at 4.99% right now. Not really worth refinancing for half %.

[patssle]

I can't see housing going back up any time soon. Fact is, we are in a jobless recovery, wages have been going down or stagnant vs. inflation for decades, and there's a ton of more foreclosures just waiting to happen.

I remember back in the early 80s people selling their homes for $1.

Difference now is that the houses were SO overpriced, despite crashing they are STILL expensive!

[red-beard]

I'd consult a tax consultant to check on the implications of a loss. It might take _some_ of the sting out of the loss.

How is your income this year? If you take a loss on the house, I think you'll be able to write that against income. If you can, take the loss over a few years to only reduce your income in the top income tax bracket, to maximize the deductibility.

[johnsjmc]

Sell it for whatever you can get. If you are selling $100k off so are others. Then buy again with your $80 down instead of $180 down. You end up with approx same mortgage +- and a similar house ,where you want to be. Prices are down all over . The sand states are down more than NJ so you might come out with a nicer house. I personally wouldn,t buy as expensive a house.I would feel better having about the same percentage equity as you had before. Like trading a car. It matters less what the new car costs it,s the delta that,s important. Rent if your new job is at all unreliable.

[Noah930]

Originally Posted by patssle

Difference now is that the houses were SO overpriced, despite crashing they are STILL expensive!

Funny you make that comment. Different perspectives: on TV just now was an episode of House Hunters where the guy was looking for a house in Houston. He was looking at places a little over 2000 sq ft, maybe built in the 1980s, for about $150K. Man, that sounds cheap. But yes, looking at those Case-Schiller charts, there's still a ways to go to hit bottom.

[Aurel]

My understanding is that, for a primary residence, there are no taxes on gains, but no tax write offs on losses as well. Someone correct me if I am wrong (it would be great!).

[patssle]

Originally Posted by Noah930

Funny you make that comment. Different perspectives: on TV just now was an episode of House Hunters where the guy was looking for a house in Houston. He was looking at places a little over 2000 sq ft, maybe built in the 1980s, for about $150K. Man, that sounds cheap. But yes, looking at those Case-Schiller charts, there's still a ways to go to hit bottom.

Houston hasn't really crashed or gone down at all, our housing was appropriately priced before the recession, and still are. My dad bought houses here during the 80s crash for $20k or less. I've looked and can't find anything that is insanely cheap today.

[Aurel]

Originally Posted by Noah930

Funny you make that comment. Different perspectives: on TV just now was an episode of House Hunters where the guy was looking for a house in Houston. He was looking at places a little over 2000 sq ft, maybe built in the 1980s, for about $150K. Man, that sounds cheap. But yes, looking at those Case-Schiller charts, there's still a ways to go to hit bottom.

Houston, Dallas seems to have the lowest house prices in the whole USA. Much cheaper than Albuquerque, New Mexico, I can tell you that. Friends just bought a very nice 4,500 sqft 5 bedroom home with pool for $350k. For the same money here, you get 3,500 sq. ft, 4 bedrooms. And for the same money in NJ, you get 2,000 sq.ft, 3 bedrooms.

[Embraer]

i moved for my job last september. LUCKILY, i had a huge network of pilots, flight attendants and others who need housing back in my old city. ive been renting my house, to people i know since then, but it still sucks being 2300 miles away from it. housing prices are crazy. luckily, what i charge for rent is more than my mortgage, taxes, and insurance....but just barely.

edit: indiana has to be some of the cheapest real estate, too. 3200sq feet, restored craftsmen home, 2 car garage, 6 blocks from Butler university. under 100K.

[rattlsnak]

Housing prices are about where they should be. They may go down a little more, but they certainly wont be in the bubble range they were a few years ago for quite some time. I do feel sorry for the innocent buyer who happened to buy during that time but not for the house flippers. My parents are in a similiar situation. One way to look at it is, yes sell the house and take the loss, but the house your buying should be priced "low" also. If you wait to sell on the rebound, then your new house will be higher also. Pay me now, or pay me later. Either way, you lose.