PMI Predicts Home Prices Will Continue Descent Through Q1 2011

California's ""PMI Mortgage Insurance Co."":http://www.pmi-us.com said Tuesday that it expects home prices to continue falling through the first quarter of 2011 in more than half of the nation's largest metropolitan areas.
According to David Berson, PMI's chief economist and strategist, rising foreclosures and unemployment, which hit 9.5 percent in June, have increased the risk for a further depression in property values. However, Berson noted that the widespread weakness in prices, combined with relatively low interest rates, have improved housing affordability across the nation and should continue to lure both repeat and first-time homebuyers back in to the market.
Based on PMI's ""Second Quarter 2009 Economic and Real Estate Trends Report"":http://viewer.zmags.com/publication/e1e7bb7d#/e1e7bb7d/6 released today, as many as 324 - or 85 percent - of the nation's 381 metropolitan statistical areas (MSAs) are now facing increased risk of lower home prices in 2011. Although the foreclosure-ravaged states of Florida, California, Nevada, and Arizona continue to be the areas most likely to see further price depreciation, PMI said the risk is now spreading to all corners of the nation.
Among the nation's 50 most populous MSAs, 28, or 60 percent, now fall into PMI's highest risk category, signifying the greatest probability of lower house prices by the first quarter of 2011, relative to the first quarter of 2009. However, the company's forecast also shows moderating price declines in some of the largest MSAs for the remainder of 2009 and into 2010.
PMI ranks the nation’s 50 largest MSAs according to the likelihood that home prices will be lower in two years. The company's Risk Index uses economic, housing, and mortgage market factors (home price appreciation, employment, affordability, excess housing supply, interest rates, and foreclosure activity) to determine these probabilities.
Following this methodology, PMI said the 10 riskiest MSAs, not surprisingly, were primarily in California and Florida. They are (with No. 1 in the list below being the most at-risk for home price depreciation):
  1. Riverside-San Bernardino-Ontario, CA
  2. Miami-Miami Beach-Kendall, FL
  3. Los Angeles-Long Beach-Glendale, CA
  4. Ft. Lauderdale-Pompano Beach-Deerfield Beach, FL 
  5. Las Vegas-Paradise, NV
  6. West Palm Beach-Boca Raton-Boynton Beach, FL
  7. Orlando-Kissimmee, FL
  8. Tampa-St. Petersburg-Clearwater, FL
  9. Santa Ana-Anaheim-Irvine, CA
10. Phoenix-Mesa-Scottsdale, AZ
The 10 most stable MSAs in terms of price depreciation (with No. 1 being the most stable) are:
  1. Cleveland-Elyria-Mentor, OH
  2. Pittsburgh, PA
  3. Columbus, OH
  4. San Antonio, TX
  5. Houston-Sugar Land-Baytown, TX
  6. Dallas-Plano-Irving, TX
  7. Fort Worth-Arlington, TX
  8. St. Louis, MO
  9. Charlotte-Gastonia-Concord, NC-SC
10. Nashville-Davidson-Murfreesboro-Franklin, TN
PMI's report also noted that as housing prices have fallen, affordability in many MSAs has improved, making home purchases much more attractive to potential buyers. For all 381 MSAs, the average Affordability Index reading was 133.3 in the first quarter of 2009, compared with a reading of 120.6 for the fourth quarter of 2008. (An Affordability Index score exceeding 100 indicates that homes have become more affordable; a score below 100 means they are less affordable, relative to a 1995 baseline.) According to PMI said approximately 98 percent of the nation's 381 MSAs showed higher affordability during the first three months of the year.