You bought it for 20% off peak, and if your estimates and recent comps are accurate – you still paid 10% less then recent comps. You like and are living in the house, and plan to for the long term. Sure prices may go down another 10-20%, or they may not. Sounds like you are OK there and shouldn’t lose sleep. If you were renting the house right now, you’d be spending what.. approximately $25-30k/year in rent right?

For the condo – honestly first thing I’d do is confirm if it’s a recourse loan or not. You re-financed so it most likely is, but maybe it’s not since you didn’t suck cash out. If it’s non-recourse, personally I’d look into walking. You did a 100% finance deal, little skin in the game, and you already own your long term home.

If it’s a recourse loan, and you can’t walk – that’s a tough call. Assuming you have ample savings to cover yourself and both properties for extended period of time should you lose your job then personally, I don’t think I’d short sale. A slow bleed gives you more time, and more cash in the near future. You aren’t distressed, and don’t have to sell.

Based on your income, you make a fair amount of money so these loans aren’t going to break your back especially renting 1 of them. And at some point in the future, whether its 5,10,15 years from now prices, rents, and your income are most likely going to be higher – especially if we inflate out. Not to mention, who knows what bailouts are coming.

The good news is – you didn’t buy and re-finance an $800k downtown condo with a $600/mo HOA! 🙂