It's no secret, all around the country prices ARE dropping & are going to continue to drop in many many areas. I do believe the Major Price Depreciation is over though, prices have already dropped as high as 70% in some areas. I suggest you get an opinion from 3 different Realtors in you area regarding value. Find out how much the property has dropped in value in the past year, the past 6mos, the past 2mos. or more to the point, since you purchased it.
Also go to http://www.realquestinvestor.com See what else around your property is in Pre-Foreclosure OR heading to auction OR already Bank Owned. If TONS of flags pop up, you can be assured that your property will continue to drop in value, from your current break even point.
Are you not all on title? If you are ALL on title & 1 of you wants to sell, he/she can't unless you ALL agree to sell.
If you can sell & break even, seriously consider doing it, based on what the Realtor says the value is now & how drastically it has dropped since you purchased it. Buy again in 1year, build your equity back up from there.
I can refer you to an agent in that area if you like.
Oh yeah, the new appraisal guidelines are causing some issues, but they will be ironed out - they should definitely not play into the decision of whether or not to hold this property in any way!