People worried about their job security or who must relocate periodically have to be more calculating now, too. "It used to be, if you got transferred to Timbuktu for three years, you'd buy," says Mary Linge, director of home ownership and education at Hudson River Housing, an affordable housing advocacy group in Poughkeepsie, N.Y. "Now, you have to ask: Will I be able to sell?"
[See Appeal Your Property Taxes.]
For many people who have faced that question lately, the answer has been a life-changing "No." Take Tom Iverson, a fisheries biologist in Portland, Ore., and his wife Laurie, who made the tough decision early this year to turn their house over to the bank after concluding it was worth $150,000 less than their mortgage. When home prices soared, they'd refinanced with an adjustable rate loan, taking out roughly $45,000 extra to pay off credit card bills run up during Laurie's treatment for breast cancer. Eventually, the interest rate reset and boosted their payments to an unsustainable 60 percent of Iverson's income. Portland, like other markets in the Northwest, entered the downturn later than other parts of the country, and home prices there are still falling; the couple reasoned that a near-term turnaround was unlikely. In January, after trying and failing to negotiate a solution with their lender, they stopped making mortgage payments and moved with their children to a nearby rental.
"I'd own a home again," says Iverson. "But not one that is more than 35 percent of my income." Meanwhile, the family's housing payments have dropped by half.