Underwater Duplex Owners Gasping For Air
Remember when someone used the word “underwater” images of scuba diving came to mind?
These days when I hear the term, my first thought is of mortgages. Thanks to recent media headlines, it looks like that will continue; unless, of course, I decide to go to the Bahamas.
In either case, it looks like it would be wise to have extra oxygen on board.
In the last two weeks, US News & World Report named Minneapolis/St Paul the seventh most underwater housing market in the country. Their data, collected from Zillow, reports that average Twin Cities home prices are down 29 percent since their peak in 2006.
In February, the Minneapolis Area Association of Realtors reported the average sale prices of Twin Cities homes was up 6 percent from February of 2009.
So if that trend continued, how many years would it take for us to be thinking of swim fins when we hear the word underwater?
Five.
Five years to regain that 29 percent decrease in value. And that’s IF we realize 6 percent in appreciation. Most economists forecast a more measured number ranging from 3 to 5 percent. That means it could take as many as ten years to be back on track.
And sure enough, yesterday’s Wall Street Journal highlighted a study by First American CoreLogic that found it could take until 2015 or 2016 for duplex owners to see positive equity again. In some areas in the nation, like Detroit, that may not happen until 2010.
Which leads me to this. If you’re an underwater duplex owner, how long can you hold your breath?
Many investors and owner occupants who bought multifamily property during the real estate boom are coming to the realization they aren’t willing to continue ownership with the far-off hope of a return to the happy days of rapid appreciation.
Lives change. Families grow. People relocate.
And sometimes, quality of life; in fact, the very ability to breathe easily, is more important than some far-off distant goal of substantial equity.
So many duplex owners are choosing to sell. They aren’t behind in their payments, they simply can’t wait for someday.
If you’re a duplex owner interested in not waiting for market conditions to change, a short sale may be your best alternative. The damage to your credit may well be worth peace of mind.