All I can see is that OP is very emotionally attached to the house based on the fact that it was valued at $600k-$650k 3 years ago. But this is in the past(!!!) and the past never guarantees the future. Maybe you'll have to wait 3-5 years for the RE rebound, but it could take 10-20 years. Nobody knows how everything will play out because the credit/financial crisis this country is experiencing now is probably the first of its kind thanks to everyone's irresposibility (gov't spending, easy credit, consumer crazy spending, etc.). If you know that your employment will end in a year, if I were you, I'd start preparations for the change (look for a new job, consider moving to another state + job, change career if feasible) and not wait until the last minute. Maybe you've been told you're OK for 1 year, but can you trust that verbal promise??
On the other hand, if you keep the house, your day-to-day finances will be extremely tight and might start depleting your $60k savings.
What's your take home $$? I'm afraid you're not even adding anything to your retirement right now, right? So, right now you're spending $420 on prop.tax + house insurance. Then you hope your mortgage payment to be $700 (and that's optimistic, IMHO). So, $1,120/mo. on the house only. What about utilities, groceries? Do you drive a car? If so, gas and its insurance?
I think you should evaluate your situation based on your take home pay, not yearly salary and see where it leaves you, because to me it seems you'll be in red each month and it says you cannot afford to live in such a house you've got.
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