My House is Worth What?

I read with some interest that area housing prices have fallen between 2.5 percent and 5 percent, depending on your Zip code. Of course, I live in the 5 percent Zip.

As I look around at my neighbors' houses, I can see why. It is not that we don't keep up our houses around here, because we do. It is simply the economic principle of supply and demand. There are houses for sale that no one wants or can afford to buy.

There are three houses within a one-block radius of mine that are for sale because the families are going through a divorce. One of them is empty and has been for nearly two years, though you wouldn't know it. The neighbors take turns mowing the lawn, though I know the bank should be doing this. Granted, they have. Twice. The rest of the time, to prevent that lawn from just going to seed and weed, and to protect our own lawns, we all mow it.

In two of the families, I know the final stressor on the marriage was loss of a job. In one case, both the husband and wife were laid off.

Expand the radius, and you can probably find a house on every street that is either for sale or at risk of foreclosure, due to a change in the employment status of one or more of the homeowners.

This is the saga that is playing out all across America.

There is a lot of talk of people having bought a property that was more than they could comfortably afford. There is a lot of talk about people who took second and even third mortgages on properties they could barely afford in the belief that house values would continue to climb forever. 

This is a belief that was at least tacitly encouraged by those banks and lenders giving out that second or third mortgage. Naturally then, there is a lot of discussion on the culpability of the banking and mortgage industries granting loans above the realisitc abilities of people to afford.

Now, people are "under water" or "upside-down" on their mortgages. Their house is now worth less than they owe. The banks and lendors were the "professionals," and people wanted to believe what they were told.

Now comes a job loss, a serious and costly medical situation or a divorce. The real cost of homeownership and house values suddenly has a different definition because a piece of the real estate equation was not factored. The cost to the people involved, their children, their neighbors and the community at large.

I've checked, and our house is worth just above what we paid for it 12 years ago. Twelve years of mortgage payments, countless improvements inside and out, and we would be lucky to get what we owe if we tried to sell. Thankfully, we have no plans to sell. Ever. This is where we chose to put down roots, and this is where we will stay. I can't help but believe those families around us had the same thought.

I don't believe there are any easy answers. I do know the majority of families are, if not suffering directly, living in fear. What if the bank decides to raise the mortgage payment or demand a lump sum to reflect the current house value? How many will be able to keep their house? How will they sell it for what the bank then detemines it is worth? To whom would they sell it, anyway?