CRASH! House values- what are people doing in this situation?

[cm8]

I now owe more on my house than I'd be able to sell it for in the next 10 or more years. I mean a lOT more. My house price has fallen from $600k range to $200k range. No kidding. Our houses were inflated (elite (so called) community) and then massive over building, and now massive abandonment. Now houses are in forclosure and for sale at CRAZY cheap prices... which basically screws me so much. I almost feel stupid for sitting here paying on it, but I dont really want to run and be a bum either. I have great credit and dont want to mess that up.
What are people doing in this siuation?
Is there anyone who knows some really cool "way" to make this better?

you pay less taxes. If you can stick it out, do it, it will pay off in the end. If you can't walk away and get a new start. Businesses do it all the time

 

[John VN]

If you walk away, the big issue is not the credit hit (give it 4 or 5 years and it won't matter), it's if your loan is a recourse loan or not. If your state does not consider mortgages "recourse" loans, you can pretty much walk away and mail your lender the keys. The lender only has rights to the equity in the house. If it is a "recourse" loan, then the lender can come after you and your other assets.

I figure it's a business transaction so you need to make a business decision. It's not a reflection on you personally if you walk away.

Strategic Default http://en.wikipedia.org/wiki/Strategic_default along with purchasing new house with current high credit rating and then not having to worry about resulting poor credit rating after the Default goes through since you will own a house with current value and lower mortgage.

As mentioned above, whether your state is a Recourse or Non-Recourse state is very important. I believe Ca. is a Non-Recourse on First Mortgage but a Recourse on any following mortgages.

 

[HeatherC]

Haven 't read all the posts, so I apologize if mine is a repeat. So sorry this is the case for you. But I have to say that I think walking away from a home because the value dropped is wrong. You made a deal with the bank to loan you a certain amount of money that you agreed to repay for a specific building...your home. Unfortunately, the value on your investment declined...but you still owe that money.

A house is an investment and investments do rise and fall...that is the risk you take when buying. No one is forced to buy a house and sign those papers. It is an adult decision that has adult consequences.

I am not sure how people can feel it is right for them to walk away from their commitments like that. Not saying that is what you are doing...just in general terms.

I do hope things turn around for you....and all of us.

 

[snowywhite89]

I now owe more on my house than I'd be able to sell it for in the next 10 or more years. I mean a lOT more. My house price has fallen from $600k range to $200k range. No kidding. Our houses were inflated (elite (so called) community) and then massive over building, and now massive abandonment. Now houses are in forclosure and for sale at CRAZY cheap prices... which basically screws me so much. I almost feel stupid for sitting here paying on it, but I dont really want to run and be a bum either. I have great credit and dont want to mess that up.
What are people doing in this siuation?
Is there anyone who knows some really cool "way" to make this better?

What did you pay for your home? You say your house price has fallen but did not say you bought it for that amount. Did you take cash out by refinancing the home? The $600K that you house hit was just a paper value and not a real value since you did not sell. A house is only worth what others are willing to pay for it.

 

[teskak]

.
I spoke to the tax assessor about having my house reassessed but I was told they won't do it since they just reassessed last year. I am paying taxes on a house assessed at $325,000 at a mill rate of 59. My taxes are over $1,000 a month which really hurt. .

Can somebody please explain to an Aussie what a "mill rate" is? and how does that affect property taxes, state income taxes etc?

Also - where do the families and people who were responsible owners and have now been foreclosed go to after thier homes go? I have read comments of people renting in 'better' neighbourhoods but what happens otherwise? if a foreclosed house was purchased, how difficult would it be to put tenants in - providing all necessary repair work was done?

It is just that in Australia, starter homes are now about $500,000 so all of the lower prices mentioned in this thread and other similar threads is rather interesting.

thanks

 

[John VN]

Can somebody please explain to an Aussie what a "mill rate" is? and how does that affect property taxes, state income taxes etc?

Also - where do the families and people who were responsible owners and have now been foreclosed go to after thier homes go? I have read comments of people renting in 'better' neighbourhoods but what happens otherwise? if a foreclosed house was purchased, how difficult would it be to put tenants in - providing all necessary repair work was done?

It is just that in Australia, starter homes are now about $500,000 so all of the lower prices mentioned in this thread and other similar threads is rather interesting.

thanks

Mill Rate explained...http://en.wikipedia.org/wiki/Property_tax

 

[golfgal]

One cannot refi an under water house.

That is not true. Many lenders are refinancing homes they already have on the books-you can't go to a new lender but his current mortgage company might be willing to work with him. It is happening quite frequently actually.


If the OP puts his house into foreclosure, unless he owns it as a business or some other non-personal way, he is not going to get financing to 'buy it back'.

 

[Carly_Roach]

you pay less taxes . If you can stick it out, do it, it will pay off in the end. If you can't walk away and get a new start. Businesses do it all the time

Not true in Michigan. When Proposal A was voted in in the early 90's the homeowners made a bargain with the state that property taxes would increase at x% rate per year (instead of when housing values went up).

While this benefitted the homeowners for about 10 years, it became a bad deal in the 2000's to the point where you'd get an end of year disclosure stating that your house's value went down but your property taxes continued to climb. You could have an original $150K house that's now valued at $75K, but with the property taxes increase every year making your taxable value at $200K.

Your home could be vacant for years and the property taxes would still go up even as the house rots and it's value declines. Properties in Detroit can't be sold for $5K, but their taxable values are still at $75K to $250K.

It's a no-win situation here. Walking away and waiting out the 7 years in purgatory makes more business sense. Like another poster here said, it's very likely that your credit rating will improve before the housing market does. That's why I advise people to get out now, walk away, take the hit, learn how to spend within your means and hope for a brighter future. That's what the corporations would do.

 

[Christine]

Back to the OP's situation. Her house is valued at around $200K. She paid $600K during good times. She can afford her mortgage, isn't losing her job, isn't being forced to move, but is just apparently bugged because her paper value isn't equal to or higher than what she owes?

Do you still advocate walking away? If you do, then you must also be on the side of the banks. If the OP bought the house for $600K and then it's value increased to $900K, would it be okay for the banks to tell her they want her to pay them more because it's worth more? Same thing. Buying a house is an investment gamble. You can't be all happy and satisfied when it's going your way but yet, when it doesn't go in your favor, think the world is unfair and that you should be able to just get out of it. It is a risk you take when you sign those papers.

I think many of us lost sight of that during the fake bubble we were in and, yes, prices got falsely inflated due to all the shenanigans going on with the market.

If you aren't between a rock and a hard place (lost your job, personal reasons forcing you to vacate your house, health issues, etc), then you should live with what you agreed to.

Housing purchases were never meant for short-term gains. It's like your 401K account--you need to be in it for the long haul and ride the ebbs and flows.

 

[Colleen27]

Not true in Michigan. When Proposal A was voted in in the early 90's the homeowners made a bargain with the state that property taxes would increase at x% rate per year (instead of when housing values went up).

While this benefitted the homeowners for about 10 years, it became a bad deal in the 2000's to the point where you'd get an end of year disclosure stating that your house's value went down but your property taxes continued to climb. You could have an original $150K house that's now valued at $75K, but with the property taxes increase every year making your taxable value at $200K.

Your home could be vacant for years and the property taxes would still go up even as the house rots and it's value declines. Properties in Detroit can't be sold for $5K, but their taxable values are still at $75K to $250K.

It's a no-win situation here. Walking away and waiting out the 7 years in purgatory makes more business sense. Like another poster here said, it's very likely that your credit rating will improve before the housing market does. That's why I advise people to get out now, walk away, take the hit, learn how to spend within your means and hope for a brighter future. That's what the corporations would do.

I don't think proposal A is quite that bad; the reason tax values are still going up is because they haven't met in the middle with actual values yet, and many of the problems have to do with local assessment processes. But I think that's the norm just about everywhere - cities and counties try to overvalue properties and it falls to the homeowners to fight the assessment (we had to do that ourselves, because our initial appraisal set our taxable value at almost twice what we paid for the house, and since that's the first-year base that our proposal-A controlled increases will be calculated from for the entire time we own this house, it was important to get it right).

Gains in tax value are capped at 5% or the annual rate of inflation, whichever is less. In areas where the taxable values are still going up, it is because they gained much much more than was able to be compensated for under that cap. A lot of people have gotten a very sweet deal for years, with home values increasing by double-digits year after year while the inflation rate (and thus the maximum allowable tax increase) was 2-3%, and now they're complaining because while they're still not taxed on the real value of the house, they want their taxes to drop because the housing market dropped.

Now Detroit, that's a special and really messed up case that I'm not sure there is a good answer to. When you can cross a street and go from a thriving neighborhood to a burned out ghetto, I'm not sure there is a foolproof way to handle comps for tax assessment purposes. I'm sure the city doesn't have the resources to do house-by-house inspections to ascertain condition and value accurately, but the traditional method of using sales in the same zip code obviously doesn't work (particularly since that method excludes foreclosures, which pretty much means that the only sales they have to compare are those of homes in unusually good condition for the area).

 

[pioneer89]

Back to the OP's situation. Her house is valued at around $200K. She paid $600K during good times. She can afford her mortgage, isn't losing her job, isn't being forced to move, but is just apparently bugged because her paper value isn't equal to or higher than what she owes?

Do you still advocate walking away? If you do, then you must also be on the side of the banks. If the OP bought the house for $600K and then it's value increased to $900K, would it be okay for the banks to tell her they want her to pay them more because it's worth more? Same thing. Buying a house is an investment gamble. You can't be all happy and satisfied when it's going your way but yet, when it doesn't go in your favor, think the world is unfair and that you should be able to just get out of it. It is a risk you take when you sign those papers.

I think many of us lost sight of that during the fake bubble we were in and, yes, prices got falsely inflated due to all the shenanigans going on with the market.

If you aren't between a rock and a hard place (lost your job, personal reasons forcing you to vacate your house, health issues, etc), then you should live with what you agreed to.

Housing purchases were never meant for short-term gains. It's like your 401K account--you need to be in it for the long haul and ride the ebbs and flows.

Well, the banks and real estate industy can't have it both ways. If the buyer has to "live with what you agreed to" then the lender should too.

A persons mortgage is not some emotional event, or community trust. It is a contract between two parties. It is subject to the contents of the contract and all of the laws where the contract was signed.

If walking away is within a persons rights, and it makes financial sense, then it's smart to do so. When the contract was made, the lender knew each and every law that all the risks involved. For the buyer to turn around and use the contract and the laws the contract must follow to his advantage later is not only smart, but it should be expected by both parties.

Your credit score is not hurt because you are a bad person, it's hurt because it's a profit-o-meter for lenders, and you are now going to be judged as someone who will not make them a lot of profit.

If buying a house was an "investment gamble" as you put it, that gamble extends to everyone who touched that mortgage, including the lender, and the people the lender sold the mortgage to. If someone walks away, then it's the lender who made the bad choice, and they should suck it up, and as it was put, "should live with what you agreed to" and "be in it for the long haul and ride the ebbs and flows".

Big Finance seems to have been very successful at convincing the general public to eat the pain on this crisis.

 

[punkin]

Well, the banks and real estate industy can't have it both ways. If the buyer has to "live with what you agreed to" then the lender should too.

A persons mortgage is not some emotional event, or community trust. It is a contract between two parties. It is subject to the contents of the contract and all of the laws where the contract was signed.

If walking away is within a persons rights, and it makes financial sense, then it's smart to do so. When the contract was made, the lender knew each and every law that all the risks involved. For the buyer to turn around and use the contract and the laws the contract must follow to his advantage later is not only smart, but it should be expected by both parties.

Your credit score is not hurt because you are a bad person, it's hurt because it's a profit-o-meter for lenders, and you are now going to be judged as someone who will not make them a lot of profit.

If buying a house was an "investment gamble" as you put it, that gamble extends to everyone who touched that mortgage, including the lender, and the people the lender sold the mortgage to. If someone walks away, then it's the lender who made the bad choice, and they should suck it up, and as it was put, "should live with what you agreed to" and "be in it for the long haul and ride the ebbs and flows".

Big Finance seems to have been very successful at convincing the general public to eat the pain on this crisis.

Just wanted to reiterate what I bolded. This isn't a moral decision. It is purely financial.

 

[minniemania]

We are under water too, by about $30 - $40k. Honestly, I don't see how we can get out. Our bank solicited us during the boom to give us a HELOC of $65k and so now we pay on that, interest only every month with not a dime going to equity and the bank will not consider refinancing us because we have not been late on payments. Our original loan we still owe $86k on. Its depressing. Yes, did we make bad choices? Yes! 1000 times yes. Hindsight is definitely 20/20. We are in Florida and I don't see this crisis correcting itself for a LONG time, if ever in my lifetime. I saw on the news last week they expect values here to drop about another 15% in the next year. So that means we will be more underwater. How will we ever pay off that HELOC?

Issue is, our house needs work, and the neighborhood is not good - we have 5 foreclosures on our street, one to our left and a short sale to our right. Like a PP mentioned, I hate to sound snobbish but what is going to move in there eventually? These homes are going for $80k. I have small children, we need to get out.

I think Florida is a recourse loan state, so we may be in trouble. I know friends who are in foreclosure and have been for 2 years sitting there in their homes not paying anything. I know others who have gone short sale and already bought new homes. Things are pretty bad here, the market is flooded with big, empty homes that people still cannot afford. Its hard to imagine this mess ever turning around.

I do think that banks bear more responsibility for giving people loans that they could not afford in the long run. No money down, stated income, interest only loans etc. Greed, they got their money, but we the people should have morals and make sure we honor our commitments? More and more I just don't agree with it anymore. Its bad but I don't think we have seen anywhere near the bottom of this thing yet.

 

[tlbwriter]

Does anyone know if it make a difference in your credit score and ability to buy another house eventually if you "mail in the keys" and move out or if you wait to be foreclosed on and get evicted?

"Mailing in the keys" doesn't have any legal standing. The bank doesn't have to accept transfer of the house, and generally they won't. They'll follow their standard foreclosure procedure, and you will eventually be foreclosed upon. The fact that you attempted to turn over the house before that happened will be irrelevant.

 

[Took]

We experienced virtually NO bubble. Our area was already economically depressed (partly from the loss of Firestone around 2000). The upside is that we've experienced very little downturn either. I'm so grateful.

I'm with those who say stay in your house. You don't know how quickly your area's values may change, especially if you hold out for the long term. Maybe a few folks would be better to "walk away" but many will not be better off.