By Ashley Wermick | email@example.com
John Diviney believed he was getting a great deal on a new home.
Diviney, a professor of Spanish and Latin American studies at Flagler College, purchased a new home in March 2008 for $247,500—$83,000 less than the original asking price.
“My house is now worth about $200,000,” Diviney said. “If you look at the difference between that and the asking price, it’s about a 33 percent loss of value.”
Diviney is not alone. By June, 5.1 million Americans will own a home whose value is below 75 percent of what they own, according to research in The New York Times. This is also the point when homeowners consider walking away from their mortgages, even if they have the money to keep paying.
Because Diviney’s home value has not dropped drastically, he will remain in his house and see what happens.
“Thankfully I have a great mortgage rate,” Diviney said. “I’m only paying slightly more than what I used to pay when renting.”
Realtor Gwen Harmon, of Watson Reality Corp. of St Augustine Beach, has also seen a decline in home values.
“The market is definitely snowballing,” Harmon said. “I haven’t seen home prices dropping to below 75 percent in this area though. It all really depends on when and where you bought your home.”
Susie Sullivan, a loan officer with PNC Mortgage of St. Augustine, said she tries to keep people in their homes because the market is beginning to stabilize.
“It’s tough,” Sullivan said. “I come across a lot of people who are giving up on their mortgages. I try to make good loans so this doesn’t have to happen.”
Kim Baughman, a real estate agent of RE/MAX on St. Augustine Beach, also sees stabilization in home values.
“In this area we are about as low as the market is going to come at this time,” Baughman said. “The market could either stay the same or slowly come back up.”
Homeowners who walk away from their mortgages often resort to renting.
“When you give up on your mortgage, it’s like buying a brand new car, driving it off the lot, putting 10 thousand miles on it and saying ‘you know what? It’s just not worth what it was and now I don’t want it,'” Baughman said. “It isn’t right, but it is happening.”
Jason Hackworth, the branch manager of Wells Fargo Home Mortgage of St. Augustine, has seen people walk away from mortgages and start renting.
“After 30 years of renting a home you have nothing,” Hackworth said. “If you pay a mortgage for 30 years, you have a long term asset. You own a piece of property.”
Hackworth also believes the market in the St. Augustine area is stabilizing and will eventually rise.
“Homes are probably the biggest investment a person will make,” Hackworth said. “Although it doesn’t seem like it now, a home does and will still have great value.”