anyone else smell Bushit ?

They say the home is worth 125, but what is it worth to you? At some point it was worth 250K to you, and you bought it at that. In your case, since you can afford to maintain where you are, then I encourage you to do so. The market will come back, it may take a little while, but it will come back around. In addition, the house is not likely going any where (acts of God as exception) and the neighborhood is probably going to be the same, so IMO you still have a 250K house, and given a little time, it will be valued as such. There is no way that the house is half value, you still have a full house, presumably in same shape as it was when you bought it?