Index Finds the Risk of Home Price Declines Has Spread
The Northeast and California again top the list of areas with the greatest risk of widespread home price declines, according to PMI Mortgage Insurance Co. And nationally, the risk of widespread price declines in the nation's 50 largest housing markets increased slightly in the spring compared to the winter quarter, according to PMI.
In general, PMI said that coastal markets crowd the top of its index of markets with the highest risk of a price decline.
The PMI risk index represents PMI's view of the probability of a regional decline in home prices in the nation's 50 largest metropolitan statistical areas over the next two years.
Fourteen of the 15 metropolitan areas with the greatest risk are in either the Northeast or in California.
"The latest PMI Risk Index numbers reveal that most of the increase in house-price risk is concentrated in certain markets, caused by regional weakening in affordability. Local house price appreciation, in many cases in the double digits, has outpaced local income growth," said Mark Milner, chief risk officer with PMI Mortgage Insurance, in a company news release.
PMI said the latest index reveals "stratification," with the risk of a price decline increasing in the highest risk areas and decreasing in low-risk areas.
Of the 50 largest markets, nine have a greater than 40% chance of seeing a price decline, according to PMI's index. In 20 of the lower risk markets, the risk of a decline is lower than 10%.
The highest-priced market was Boston, with a 53.4% probability of an overall house price decline over the next two years. Nassau-Suffolk, N.Y, consisting of Long Island suburbs of New York, ranked second with a 51.1% chance of a decline, followed by three California markets, Oakland-Fremont-Hayward, San Jose-Sunnyvale-Santa Clara and San Diego-Carlsbad-San Marcos. Those three California areas each had a likelihood of seeing a price drop of just below 50%, according to PMI. All told, eight California MSAs rank among the 15 most likely to see a price decline.
Among all 50 MSAs, the average risk stood at 202, meaning there is a 20.2% probability of an overall price decline in the nation's largest housing markets during the next two years. In the previous quarterly index, the risk had been 16.1%.
The markets least likely to see a price decline were Indianapolis and Pittsburgh.
AT A GLANCE: Markets with Greatest Risk Of Home Price Decline
MARKET RISK INDEX
Boston-Quincy, MA 534
Nassau-Suffolk, NY 511
Oakland-Fremont-Hayward, CA 487
San Jose-Sunnyvale-Santa Clara, CA 481
San Diego-Carlsbad-San Marcos, CA 467
Cambridge-Newton-Framingham, MA 446
Santa Ana-Anaheim-Irvine, CA 431
Los Angeles-Long Beach-Glendale, CA 404
Sacramento-Arden-Arcade-Roseville, CA 401
Providence-New Bedford-Fall River, RI-MA 389
Source: PMI. Note: divide by 10 to get estimated percentage likelihood of a price decline over the next two years.
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