Posted on Wednesday, February 10, 2010
PMI’s U.S. Market Risk Index measures the likelihood of lower home prices in two years for each of the nation’s 384 metropolitan statistical areas (MSAs). The index uses economic, housing, and mortgage market factors (including home price appreciation, employment, affordability, excess housing supply, interest rates, and foreclosure activity) to determine these probabilities.
There are increasing signs that house price risk has stopped rising, PMI said. Of the 50 most-populated MSAs in the United States, 22 had declines in their risk index, while only 17 had increases in the third quarter. Among all 384 MSAs, risk scores in 212, or 55.2 percent decreased, compared with 136, or 35.4 percent, that had rising risk scores.
Florida, California, Nevada, and Arizona MSAs continued to face the highest probability of continuing price drops. PMI said all metro areas studied in Florida, Nevada, and Arizona have risk scores that remain significantly elevated.
PMI says excess housing supplies and rising foreclosure rates, coupled with increasing unemployment place downward pressure on house price appreciation and could drive prices lower over the next two years. On the other hand, increased affordability and declining foreclosure rates in some MSAs are helping lower risk scores in many areas, the report said.