PHOENIX - Christine Rotz's story is hardly unusual. She bought her home at the peak of the market, and has watched its value deteriorate for two years.
Today, her home is worth about half of what it was, and Rotz wonders if she'll ever break even.
"I mean I'm hoping that, you know, it'll be less than forever, maybe five ten years but at the rate things are going it just keeps depreciating more and more and not going up," she said.
In Arizona, more than 51 percent of homes have negative equity -- meaning the market value is less than the value of the loan. According to the real estate tracking firm, First American Core Logic, about 706,000 homes in Arizona have negative equity.
First American estimates the value of property at negative equity at more than $140 billion. California, Florida, Ohio, Texas and Arizona accounted for nearly half of all negative equity homes nationwide.
In the Valley, First American estimates 56 percent of homes are at negative equity, and nearly 60 percent are at or near negative equity.
In many cases, according to mortgage specialist Dean Wegner, homes have lost more than half their value. Wegner and others now believe the average homeowner, making their regular mortgage payment, will need to wait at least 11 years before their home's value matches the what they owe on their mortgage.
"Normal appreciation is about 6 percent a year, and that's an 18 year average, and that's pretty much what we can count on going forward," Wegner said. What that means, according to Wegner, is homeowners will face a slow climb back to their break even point.
Wegner's 11-year estimate is based on a simple formula of compounding interest. For example, if your mortgage is worth $200,000, and your home is worth $100,000, compounding interest means it will take 11.8957 years for that home to double in value.
Wegner says for some homeowners, it might actually make financial sense to "strategically abandon" their homes, allowing it to go into foreclosure, and then waiting to buy a new home in three years. Other homeowners might want to short sell the home rather than make thousands in mortgage payments.
Want to see how long it'll take you to break even? Try the
"break even" calculator. You'll need to estimate your home's current value and you'll need to know the value of your mortgage.
