Thursday, March 25, 2010

That Sinking Feeling

The news for the past three years has been rife with homeowners' tales of woe. They usually go a little something like this: a family buys a home with no money down. Gets an adjustable-rate mortgage to avoid paying PMI. Plans to sell the house before the ARM period runs out (usually five years). But the market tanks, and so they can't afford to sell. Then the mortgage adjusts, causing the payments to skyrocket beyond what they can afford. So they stop paying. And then have to walk away. Of course, there are a few things going on now that are preventing this from happening as often – the federal fund rate is low, so when the ARM adjusts, it might actually adjust lower. And there are federal programs in place to try and help people avoid foreclosure, usually by offering grace periods on interest, or extending the mortgage to 40 years.

This won't be a post to talk about how I feel about this – was it the shady mortgage companies, the traders selling mortgage backed securities, or greedy homebuyers buying more than they could afford? For those discussions, I've found to be a good source… although a bit of a scary one at times (those people seem to take a great deal of joy in predicting financial Armageddon).

But this is more of a post to talk about where I'm at with all this. And why I have no plans to walk away… even though I currently live in a depreciated asset. First off, we bought it. While I occasionally get bitter about all the advice we were given about how we had to "buy now, or be priced out forever!" we still made the leap, chose the home and entered into a contract. I wouldn't feel right about walking away from my financial obligation. Secondly, while it is not my dream home, there are things I quite like about our little condo. We live in a fabulous neighborhood. It's very walkable, especially for a young family like ours. We live around the block from two well-maintained parks, an elementary school, a pre-school and a gorgeous nature center. We also live close to the main strip with stores and restaurants, and about five minutes drive from downtown. The condo itself is quiet – we are blessed with nice, inoffensive neighbors. And we've put a lot of work into it that I'm proud of. Every time I get the itch to move, I look around at all the things I've put into the condo – the light fixtures, the new washer and dryer, the new floor in the kitchen, and that urge dies down a bit.

Finally, we're just not that bad off, and for that, I am grateful. Our payment is low, and we can afford it. It's never changing; we have a fixed-rate mortgage. And some day, maybe, if we ever do get to move into a single family home, if we have enough equity just from paying down the mortgage, maybe we could break even, or at the very least keep it and rent it out. There's always the chance that we'll continue to pay down the mortgage and the market might creep back up, and we'll be able to meet in the middle and break even. It's just that possibility is likely 5-10 years in the future, when we bought this place with a five year timeline in mind (and are on our fourth year).

So what about you? Are you underwater too? Sticking it out? What are your plans for making the best of your situation?

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