Distressed Homeowners Ponder Whether to Stay or Go

Brian Gindlesperger says he has never been late on a mortgage payment and considers paying off his loan "the right thing to do." But as the value of his home continues to fall, he is starting to wonder whether paying his debt is the smartest thing to do.

Four years ago, Mr. Gindlesperger, a police officer, and his wife Kelly, a real-estate agent, paid $650,000 for a four-bedroom house in this wealthy Phoenix suburb. They believed they were getting a bargain price for the area and made a 20% down payment, using a 30-year fixed-rate mortgage to pay the balance. To help pay for their eldest daughter's college costs, home improvements and a wedding, they took out a second mortgage against their home. Now they owe about $647,000 on the two mortgages.

But home prices on average have dropped about 48% in the Phoenix area since peaking in mid-2006, according to the First American CoreLogic index. Mr. Gindlesperger figures his home now probably is worth only $375,000 to $425,000, even though it comes with a four-car garage, a pool and a 1.2-acre lot. Zillow.com, a Web site that makes home-value estimates based largely on recent sales of nearby properties, pegs their house at $374,000...

WSJ: Distressed Homeowners Ponder Whether to Stay or Go