From the APP:
Cynthia Spratt, a single mother of two, recently considered putting her Toms River home on the market and moving inland so that she could avoid the expense of flood insurance and save thousands of dollars.
It was a good idea — except that she bought her home in 2007 near the peak of the housing market. The value of the house and the equity she put in it have dwindled.
“There’s no way I could turn around and sell my house,” said Spratt, 37. “I would walk away from this house with almost nothing to put down on the next house.”
Spratt is one of thousands of New Jersey homeowners who have watched as what was supposed to be their most valuable assets — their homes — lose so much ground that it is virtually worthless to them.
Purchasing a home once was thought to be a cornerstone to building wealth. But now buyers who did just that at the peak of the real estate bubble have little flexibility. They would have a hard time moving if they found a new job out of state. They couldn’t tap into their homes’ equity in case they need a new roof.
Before the housing bubble, a house was “forced savings,” said Jordan Celkupa, a financial planner with Robert J. Oberst Sr. & Associates in Red Bank.
“You borrowed a chunk of money. You paid the mortgage off. And then, magically, you owned this big asset,” Celkupa said.
Now? If you bought a house near the peak, “you’re going to have to make some tough decisions,” he said.
The problem could last for as long as a decade, experts said. Median home prices in New Jersey more than doubled from 2000 to 2007, fueled not by rising income — that grew just 25 percent during that time — but by increasingly exotic mortgages, according to Patrick J. O’Keefe, director of economic research for the Roseland-based accounting firm J.H. Cohn.
Some homeowners began to default. Foreclosures rose. Workers lost their jobs. Lending standards tightened. And the supply of homes for sale far outpaced demand from qualified buyers. Home values have declined 34 percent nationwide and 20 percent in New Jersey from their peak in 2006, O’Keefe said.
One result: Some 310,000 homeowners in New Jersey, or 16 percent of the state’s homeowners, are “underwater,” owing the bank more than their homes are worth, said Jeffrey Otteau, president of Otteau Valuation Group, a real estate appraisal and consulting firm in East Brunswick.