PMI Mortgage Insurance Co., the U.S. subsidiary of The PMI Group, Inc. (NYSE:PMI), today released its Spring 2008 U.S. Market Risk IndexSM, which ranks the nation’s 50 largest metropolitan statistical areas (MSAs) according to the likelihood that home prices will be lower in two years. The U.S. Market Risk Index shows risk is beginning to mitigate in some areas of the country while it continues to increase in others. Risk continues to increase in states where price growth dramatically exceeded historical norms and began to decline in areas where prices grew at a sustainable rate.
The Spring 2008 Risk Index is based on fourth-quarter Office of Federal Housing Enterprise Oversight (OFHEO) data. Thirteen of the nation’s Top 50 MSAs are in PMI’s highest risk rank, with a greater than 60 percent chance that home prices will be lower in two years. Risk remains largely concentrated in a number of MSAs in California and Florida, as well as in Las Vegas, NV, and Phoenix, AZ. Risk scores translate directly into an estimated percentage risk that home prices will be lower in two years. The MSAs with the highest risk scores were Riverside/San Bernardino/Ontario, CA (93 percent), Las Vegas (91 percent), and Orlando (85 percent).“Excess supply is responsible for much of the risk we’re seeing in the market,” said David W. Berson, Chief Economist and Strategist for The PMI Group. “The excess supply of housing in the United States is 9.2 months for existing homes (the 20-year average has been 6) and 9.8 months for new homes (the 20-year average has been 5.5), which will continue to depress prices for MSAs in risk ranks 1 and 2.”
