You made a wise decision, you bought for the right reason and you are set for the long term on your purchase. If the fundamental reason(s) that you've bought have chaged, diferent story. But as Mr. Iverson said, making a move now will only cost you money that you don't need to spend. And even when your mortgage resets in 2013, you will likely be locked into a similar rate then for a year as you are today (it's a little known secret how ARM mortgages are priced, and I am happy to share with you that secret. But here's a hint: the investor is betting on the fact that the rate at adjustmet will be the same as it was at commencement).
And regarding a 30-year fixed mortgage, it's kinda like buying Whole Life versus Term insurance: you"ll pay a lot more for it if very long-term security is what you need, but Term is likely more appropriate.
Mounain View is a great city with the best values in the Bay Area, and I echo again Iverson mentions about Mountain View: 1. city is well run, downtown is transformed, parks are the cleanest that I've seen on a consistent basis, schools are improving consistently, city knows how to lure the right business', etc. I lived there for ten years before moving to Palo Alto, and I have the fondest memories of living in Mountain View.
Enjoy your home
I don't know what kind of rate you have on 7 yr interest only. Interest rates are very attractive lately. 30 year fixed is down to 5.625% - 5.5% these past two weeks. Refinance and pay down your mortgage would probably make you feel "less burdened", and "secured" of the downpayment you invest. You should'nt worry too much of your property value. We are holding quite firmly in Silicon Valley compared with all other areas in California and in the nation.
Please read my BLOG about this.
Heres the problem in a nut shell. One of the major real estate concerns is that people are no longer committed to owning property for the long haul. If it isn't appreciating at a rate of 8%, people want out because something's wrong.
Most of our present real estate delema today would be resolved if people were thinking of their home as a "long term" investment.
Keep the property. If it looks like you can re-finance within the next 5 years to a 30 yr fixed - do it.
Don't sell because it will cost you more in the long run. Why? 1) your selling in a softer market, (2) transaction costs will create a bigger loss, (3) you'll lose your tax benefit of owning a property (3) you still need a place to live. Your home should be a home (lifestyle first and investment second.
As long as you can cover your mortgage comfortably, I would stay. If the market goes down for the next five years (highly unlikey) then you might have a decision to make at that point. Never sell unless you have to and you really don't have to.
Santa Clara real estate is going through a rough period right now, but the fundamentals are far stronger than the rest of the nation. The law of Supply and Demand still applies. What we are seeing now is an over-supply of homes for sale,but the fact is that there has been, and will continue to be,a housing shortage in Santa Clara County. As soon as the current mortgage fiasco sorts itself out ( I've heard estimates of 6-18 months), the shortage will become more apparent since most new construction has come to a halt.
Certainly no one can guarantee the future, but history shows that housing recessions rarely last 5 years and we are already 1-2 years into this one. Since you are a student, I would recommend concentrating on your studies and not lose any sleep over what's happening in the market. Your housing situation appears very sound and secure.
Best of luck,
If you can still afford the mortgage payments, I recommend that you stay put. You only have a paper loss unless you sell, and your mortgage isn't going to adjust for another 4.5 years. In the meantime, you have a roof over your head and a home that you like. Real estate is unlike many other investments in that it is not liquid (it takes a while to sell in even the best markets) and it appreciates over time, especially here in the Bay Area and especially Mountain View.
The long-term prognosis for the Mountain View market is positive, as the city is strong financially, and is able to invest in projects that add value to the community, like improving the schools, public infrastructure, etc. The revitalization of Castro Street over the last ten years is a great example of this. These all affect property values positively.
At the same time, the hardest hit segment of the market has been the $800K and under / first-time buyer market. A lot of the buyers through 2006 were buying with minimal down payments, but with strong cash flows and 5 - 7 year fixed mortgages. Now with lenders generally requiring 20% or more down, these buyers are locked out of the market because they don't have the cash for the down payment. My expectation is that lending guidelines will relax somewhat over the next 4 - 5 years (probably sooner), so these buyers can re-enter the market, raising the market value of your home as demand catches up with and eventually exceeds supply again. As the new projects in Mountain View are bought up, the supply of homes in Mountain View will decrease as well, which will also have a positive impact on prices for existing homes and condos.
You can get free monthly reports on the market for condos or single-family homes with charts and long-term trends for a number of neighborhoods in Mountain View and the surrounding communities at: http://www.remarketreports.com
Don't Panic. We are in a great area. Our Real Estate prices have dropped the least in the country. Our employment market is strong. Once the REOs clear the market, the prices will start to rise again.