You have already lost the $ you put down. That is gone whether you sell or not. I would look at your family's 5 year plan. If you are raising a family and the home is working for you, and you are still able to make payments on the home and your other obligations, I would sit tight. Right now, in my opinion, owning a home is like owning stock. Most of us own stock for the long term. We don't sell it all because the value went down for several months. We stay the course.
If you are experiencing financial difficulties, then you might want to explore your options. Everyone's circumstances are different, but you should talk to a financial planner, your tax advisor, Realtor and real estate attorney, to see what scenarios work best for you.
However, you will find that your tax refund in 2012 will be much lower because you will no longer be able to write off mortgage interest and property taxes on your itemized deductions. You would probably only take the standard deduction... (talk to a tax guy on that, though.... I am not a tax guy)
So even though your monthly stays the same, you'd probably lose.
Almost all of your $200,000 loss occurred during George W Bush's second term, the past two years we have seen almost zero appreciation, but it is not widely know that values here have not dropped either since February 2009.
In recent sales a lot of people realized losses that had already occurred, so it felt like it happened to them later, but actually real estate value disappeared in the years 2005 through 2008.
I can't draw a graph here but imagine an gradual upward line from 1974 through 1989, with a wobble here and there a flat line from 1990 through 1994, then a slightly upward line starting in 1995. The line wobbles in 2001 then starts climbing like a rocket from 2002 to 2005 then it stalls it starts to plummet in 2006 gaining momentum downward till 2009 then flattening out again.
2002 through 2005 was a freak aberration in real estate values. A classic bubble. The crash has been deep and sustained. Flatness is likely for several more years. with wobbles. I think it will be five to ten years before you see $540 again. but you might get some of it back in the meantime. If I can stay in my house five more years I will. I makes no economic sense to downsize after the kids move out.
I would stay put, but only you know your whole financial picture: for example have you lost your job and now it is difficult to make that payment? or is it you can make the payment but it is bugging you the house is worth less?
Sit down with your financial advisor and see what makes sense for you.
You may want to check on having your property tax value adjusted, if it hasn't been done already, at least that will help a little. Contact the county tax assesor.
With out more information about your exact circumstance I will be giving you to much information that will not apply. My advice, consult with a Realtor you feel you can trust, get along with, and can communicate with you clearly. Good Luck!
Unwavering Commitment to Service