10 months ago, we bought a new house ($250K). Our previous home was smaller, older but in a more desirable area.

So in less than a year, your house declined in value almost $70k, or more than 25% of its value? I would hardly call that a desirable area.

maybe the housing market will turn around, and we'll have a little more equity in the house

Your house lost 25% of its value in a year. What gives you hope that the value will increase in the next few years? It sounds like you've already made two bad decisions - buying the first house, and overextending yourself on a new house by grossly overvaluing your current house (which you would have sold at a nearly 10% loss even if your first realtor's comps had been accurate). Are you willing to double down on tenants? What if the house continues to decline in value, and your tenants destroy it, causing you to incur massive repair bills, only to sell at a loss?

Perhaps it's best to sell the house now, and be rid of it.