It's Official: Our house is upside down - Lost $60k in 2 years.
Yep, I have finally confirmed it. After almost two years of purchasing it, our townhouse is now worth around $300k, down from the $360k we originally purchased it for....and we still owe a good $350k.Unluckily, we also we picked it up at the very tippy top of the peak! Yikes. But at least we *know* what we're dealing with now. It's not like it was a huge surprise, ya know? I thought it was worth around $320k, but that was a total guess. And a really bad one too ;)
In theory though, it really doesn't matter until it comes time to sell....at least that's what I keep telling myself ;) But it's true in way. It's not great for the total "net worth" if you calculate it in like I'll be doing now, but the losses aren't realized until someone buys it from you. I guess my dream of moving closer to the city will have to wait a while.
So how did I come to this new figure of $300k (well, actually $305k)? I did two things:
1. I signed up with Zillow.com!
Ever been there? It's freakin' sweet man. You type in your address, and it'll pop out an average of what it thinks your house is worth! Then, if you want to take it a cple steps further, you "claim" your house and tweak the information, and it'll pop out an even better estimate of the value. The key to all this is "estimated", but depending on where you live it's pretty good at guessing (you can see the ratings here).
There's a whole mess of goodies you can pull on your house too. You can see the value over certain period of times, the amount of homes up for sale or foreclosing around your neighborhood or city or state, whatever you want! You can also pull one of the following graphs:
2. I called my Realtor and had him price it.
This is what sealed the deal for me. I told him I'm interested in moving closer to the city (the truth), and wanted to know how much he'd list it for if we were to throw it on the market in the next month or so (sorta white lie). Our realtor is an expert in our particular neighborhood,having bought and sold around 15+ alone there, and we continue to keep in touch & help each other out when possible - like when we did a tv show segment on "new home buyers" ;) it was awesome! but that's for another day...
Anyways, due to the foreclosures/short sells in our cul-de-sac, he said the most we could expect to get for it at this time is around $300k. But, if we wanted to rent it out, we could get around $1600-$1800/mo depending on how quick we'd want to do it. Then, if you wanted to be totally hands off, you could pay 8% and have a management company take care of all the issues w/ it - collecting the rent, sending over plumbers/electricians/etc. So that would add another $150 or so, but still good to know.
Soooo, between our realtor and Zillow it looks like we have a decent answer here. I'm sure it'll change over the months as the economy fluctuates like a college freshmen, but we'll be keeping our eyes on it and updating as necessary. Another "account" to watch and obsessively check all the time ;) haha....nah, my 401k is enough. I can't take 2 crazy accounts like that!
Labels: crazy economy, education, home ownership
posted by J. Money at
11:37 AM
21 Comments:
I'm sorry, I'm in the same boat with you. Wish it were a houseboat to float us out of this mess. I bought in LA in 2005, paid $345k which was cheap at the time. House prices are all over the map in my neighborhood, each house is very different. The value is somewhere between $200k and $300k, so I'm either slightly underwater or completely drowning. Do you have a fixed rate loan, job steady etc so you can just ride it out? I could probably rent out my place for $1600, it's next to a university, but that is cash flow negative. Well you have me to keep you company while we ride this out :)
How does that affect your ability to refinance if you want to? Since you are under it seems everyone refinancing has 20% in their house so they are approved. I just purchased a house 1 year ago, jan 08, and according to zillow my value has gone up, but I am really not sure that I could sell it for anywhere near what zillow shows and I am not interested enough in moving to call a realtor about the value right now.
However, if I could refinance my 5.875 down near 4-4.5 then I would likely try to do that.
Have you considered refinances at all?
A lot of people are in the same boat as you, unfortunately, especially on the East Coast where the bubble is always bigger before bursting!
I think for folks in your situation, it makes the most sense to stay in the home until the prices rise again. I plan to take advantage of these "lower" prices, hopefully within the next year (I'm a lowly renter, haha).
I'm not upside down (yet) but I am almost in the same boat. I found out (when I tried to refinance for a better interest rate) that I owe almost exactly what my condo is worth because the average price of condos in my area have fallen. Rents are falling too, so it looks like I'll be stuck for a while. Oh well - at least I like it.
@Miss M - it sucks, right? but yup, got the steady job and fixed rate loans (well, at least the 1st one...but the 2nd one is hovering around 2% and will stay so for quite some time!). We'll ride it out together for sure ;)
@Philip - Brilliant question! And unfortunately i have a not-so-brilliant answer, at least for myself. YES, it's a GREAT time to refinance if you a) have the equity to qualify ,and b) it makes sense to. I'd say anything 1% or more "makes sense" here, but it's totally anyone's call.
I'll be posting about it sometime soon, but in our situation we CANNOT refi, at least with 99% of the banks out there. We owe more than we own, and the only bank that will consider it is if we go w/ the same one as our 2nd mortgage is through - which is USAA. I've already called them and they said they could do it, but i'd have to put up $9k and then turn our "interest-only" into a "conventional" loan...not the worst thing, but we're really not ready to spend that $9k as yet - it would take 2 years or so to make it up, at which point who knows where we'll be (although i have somewhat of an answer! haha...in the same house)
So yes, it's def. possible you can refinance even w/ no equity, but the odds are extremely stacked against ya. And actually, i called Chase (where our 1st mortgage is at) and they literally laughed at me - i kid you not! i was like, "do you know who i am?! I'm J. Money bitch!" haha....but instead i just laughed it off myself and asked "why not" to get some more info...
@RainyDaySaver - "lowly renter" ?! No way my friend, you are a "Smart as hell renter"! haha...pros and cons each way you think about it though really. But it's def. a helluva good time to buy once you're life permits ;)
@Jane - There ya go! If you like it and are happy, then it's all gravy baby...it's when you're itching to move (like me) and you've got nowhere to run. But we still have hope!
While we're not upside down- we have lost about 50k on our value, which is 50k in real money home equity! :( Luckily, we are still around the 20% equity mark (thank God for that huge down payment we saved!) and we are in the process of refinancing.
It definitely sucks to feel "Stuck" in your house- but it is your house, your home and for us, anyways... we're just happy to not be renting anymore. :) Even if it does cost us 3k a month. eek!
I'm in the same boat as you. We bought our house for just over $300k and it's now down in the $260ish range. Makes me wish I continued renting!
I wouldn't worry too much about it. Housing prices will come back up eventually. Plus, you you'll have a ton of that mortgage paid off in a couple of years.
At least you're not in the situation where you HAVE to sell right now. Do you think you and the Mrs would ever want to rent it?
Ahh! I LOVE ZILLOW.
I know, we kinda wish we were still renting too :( But at least we're learning a helluva lot and have a secure place of our own, so that's good.
And yeah, I think the Mrs. could be convinced to rent it out, but only if I found her an even better place to move her into ;) It would def. take some good research and planning, but we shall see.
Ouch, so sorry to hear this. But you're right, it's only a problem if you are planning on selling before it recovers some value. At least you're not desperate to move.
I'm sorry to hear that. Zillow used to be incredibly inaccurate in my neighborhood (it's a weird transitional urban area, very block-by-block), so I never paid any attention to it. But after I read this post, I checked and our house is UP in value $40k from when we bought it. Crazy, especially in this market! I guess buying in a slightly sketchy area was a decent investment after all. We're not planning to sell anytime soon, so I'm hoping that number will go up, or at least stay where it is.
Interesting, USAA said they would finance you underwater?? Would that be for 1 fixed rate loan or they'd refi your 2nd only? I'd love to know, I'm a member (legacy membership), underwater and need to get out of an ARM.
hey, doesn't this mean your property taxes are going down? :)
Like Fit Wallet, Zillow can be a bit weird in my area for the exact same reasons. Nonetheless, I bought my place for $199K and it is around $159K. Sad but true. It bugs me, but like you, I am not looking to sell right now so it really doesn't matter. I am in a wonderful area though which in a few years is going to be very desirable. The trend should turn around.
@Frugal - it's all good...as long as you still love me ;)
@Fit Wallet - yeah, it does get a bit wonky sometimes. just checked out your post on it - how exciting that you haven't lost a lot!!! good for you.
@Miss M - Yup, they sure did! But I could only refi my 1st main mortgag that way, and not my 2nd...and the fees were about $3k more than normal, but totally worth it if you can put a "fix" on everything ya know? You should totally call them though and see what they can do for you - they'll always at least try and won't laugh you off like others do ;)
@paradigmshifted - One would hope! I'll be keeping my eyes out out on that for sure. (hadn't thought about that yet - thx!)
@Dawn - No doubt! hang on until you're forced to sell.
We had an appraisal in December 2007 for $266,000. We did $100,000 addition and just received an appraisal for $250,000. We lost over $116,000 in 13 months.
OUCH. at least you have more room now with the expansion! might be a while until moving day :(
How discouraging.
Well. Hang in there. The rental amount is not bad, really, if you're anxious to move. But if you're not, the longer you can sit tight, the better off you'll be. It may take a few years, but housing prices will come back up.
I wouldn't put too much faith in Zillow. An experienced real estate agent who's knowledgeable about your area is far more reliable. It's OK, BTW, to ask more than one agent for an estimate of your property's value. Some are more aggressive than others.
Hm, the fact that you have the two loans may explain why they will refi your first. The second loan is subordinate, meaning it would get wiped out in a bankruptcy or foreclosure. Your first loan is probably not underwater, so to USAA you have a little equity. You may need the 2nd's approval to refi the 1st. I haven't called USAA yet but I checked out their rates online, a bit high and really expensive closing costs. It does look like they'll do high loan to value ratios though. Thanks for the info.
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