I’d have to agree with the other posters here regarding the situation and also add that I agree with UCGal: A 1,900sf house is not a small house by any means.

The first house I bought (1991) was in the San Carlos/Grossmont JC area and was just under 1,300sf. It had 3brs and that would have been a tight fit with 2 kids, but 1,900sf should actually be somewhat comfortable.

Obviously, being $150K underwater is nothing to sneeze at, but if you can continue making payments and you like the house/neighborhood/schools and your commute isn’t overly onerous, why not stay? It sounds as though your kids are young, so you won’t be going anywhere soon and at some point, the market will turn, enabling you to recoup some of that lost equity.

Bailing the situation, on the other hand, introduces a whole bunch of unknowns into the mix, including going from an owner to a renter and into a house you don’t own and know nothing about. As bad as your situation is now (and I understand the sentiment behind having your wife weigh in on you like that), it could definitely get worse, especially from a legal vantage point.

Playing the cards you’re dealt is generally preferable, over the long haul, to trying a whole new hand.