PMI Risk Index Reflects Brunt Of Recession

rt from PMI Mortgage Insurance Co. projects that 60% of the top 50 metropolitan statistical areas (MSAs) have a greater than 50% probability of lower home prices in the first quarter of 2011. As many as 324 of the nation's 381 MSAs are now facing increased risk of lower home prices in 2011, according to PMI. Florida, California, Nevada and Arizona continue to have the highest risk scores – 36 of the most risky MSAs are located in these four states – but an increased risk of lower future prices is now spreading across all regions of the nation, due to the significant increases in unemployment and foreclosure rates. Among the nation's 50 most populous MSAs, 28 are now in the highest risk category, signifying the greatest probability of lower house prices by the first quarter of 2011, relative to the first quarter of 2009. Although the PMI's risk index does not measure the magnitude of declines, the forecast remains consistent with the outlook for moderating price declines in some of the largest MSAs for the remainder of 2009 and into 2010. "Rapidly rising foreclosure and unemployment rates, continuing declines in house prices and weakening consumer demand all worked to increase risk in the general economy, and the housing market, specifically," says David Berson, PMI's chief economist and strategist. "As a result of the continued weakness in prices, and the relatively low level of interest rates, improvements in affordability across the nation's MSAs will continue to incentivize repeat and first-time home buyers back into the market." PMI's proprietary affordability index measures today's housing affordability in a given MSA relative to a 1995 baseline. An index score exceeding 100 indicates that homes have become more affordable; a score below 100 means they are relatively less affordable. The company found that for all 381 MSAs, the average index reading was 133.3 in the first quarter of 2009, compared with a reading of 120.6 for the fourth quarter of 2008. Across the nation, approximately 98% of the 381 MSAs showed higher affordability. SOUR


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