Jay, Both Buyer and Seller in Castro Valley, CA

My wife and I purchased our first home in Castro Valley two years ago for 540K. Since then we are more than

Asked by Jay, Castro Valley, CA Thu Sep 25, 2008

150K upside down and feel we are paying a mortgage that is inflated and may never gain equity let alone be what it was worth two years ago. We need advice as to what are our options? Should we sit tight and wait or is there a better way to get out, maybe short sell and go buy another home at a lower price and lower our mortgage? I noticed someone mentioning on this site that homes typically double in value every ten years…is that really true? Would that mean in eight years our home may be worth 1M? I guess when you hear of everyone bailing out…should we? How does it effect your credit in buying a new home?

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Thanks for this important question about homes doubling in value every ten years. I've done a lot of research on this. Historically, homes values increase ONLY at what the level that inflation increased. These unbelievable home prices in the entire East Bay area of California rose to unsustainable and ridiculous levels. Home values during this "fantasy" period showed increases of between 150% and 200%! Show me any investment with returns like that! Unfortunately, many buyers got hooked. Many of today's sellers in the East Bay CONTINUE thinking they will get the same profits their neighbors enjoyed 1.5 years ago. They think if they lower their asking price by 40% -- that they are taking a huge loss. This is incorrect. A 40% price drop on a property (which erroneousely gained 150% to 200%) is nowhere near realistic. Unfortunately, home prices have only dipped a little and have further to go. Much further to go in California. As the previous author wrote, wages have NOT kept pace for the American worker these last 8 yrs or so--REAL wages have decreased for American workers and they will remain this way for another decade. This recession period that we have entered is a nasty one. I don't see stocks regaining their lost ground for another decade. You can try a short sale, but understand you are now competing with others in the same boat. You will HAVE to price your home to out-compete the others. You bought at the height of the market.
1 vote Thank Flag Link Thu Sep 25, 2008
If houses typically double in value every 10 years, then everyone's salary must double every 10 years. Looking at the minimum wage, this can not be true. It's all in the timing, and your timing was not very good. In my opinion, we will not see 2005 bubble prices again for 20 years or more. Good Luck
1 vote Thank Flag Link Thu Sep 25, 2008
Hi Jay,

I was wondering if you ended up selling your home or you are still holding on to it. Did you try to do a loan modification? If you want to kep your home, that should be your first option. It is easier to try for a modification on your principal residence rather than an investment property.

If the bank does not agree to a modification that either drops the interest rate down substantially to bring the payment down and/or reduces the loan balance (that one is tough), then you may want to go for a short sale. Keep in mind a short sale will affect your credit.

But if the value has gone down so much that it does not make sense to hold on to it anymore, then you should consider a short sale.

If you want to call me at 925-425-9491, I can answer your questions and see if I can help you. I sell many homes in Castro Valley and I am very familiar with home values in the area.

Meena Gujral
0 votes Thank Flag Link Mon Jan 31, 2011
Wondering What you decided to do...The marekt has shifted sevral more times since you pposted this question... WOuld you consider given us a Update.

Best Regards,
Chani Trafficante
Keler Williams Realty
0 votes Thank Flag Link Thu Oct 21, 2010
Wow. Amazing as I read the posts from real estate agents who advocate continued fantasy thinking about real estate prices. Year after year, the agents continue the hype. " Buy Now - housing will never be this cheap again" , they say. To the sellers they say, " Hold tight, values will increase shortly". Now it's the Fall of 2010 and still they sing the same 'ol tune. Jay, you are probably long gone by now after walking away from your mortgage. If you were $150 K upside down in 2008, and you are still there, you are now at least $200 K upside down. You bought at the very height of the market. Don't even think about buying another home for at least 7 years. Rent, save your money and restore your credit. This is advise you need to hear.
0 votes Thank Flag Link Wed Oct 20, 2010
I would recoment to hold tight if you can - i cannot say you home will double in value, but more that like will retain the value of the original purchase and then-, Please do not walk- if you can hold on and get a better loan either through a loan modification or refinance
0 votes Thank Flag Link Sun Apr 11, 2010
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