PMI Mortgage Insurance Co. released its Spring 2008 Market Risk Index today, a report that ranks the nation’s 50 largest metropolitan statistical areas by likelihood home prices will be lower in two years.
The report, which is based on data from Office of Federal Housing Enterprise Oversight, found that 13 of the nation’s top 50 MSAs are in PMI’s highest risk category, with more than a 60 percent chance home prices will be lower in two years.
Unsurprisingly, the MSAs with the highest risk scores were Riverside/San Bernardino/Ontario, CA (93 percent), Las Vegas (91 percent), and Orlando (85 percent).
The likes of Fort Worth-Arlington, Pittsburgh, and Dallas-Plano-Irving were on the opposite end of the spectrum.
The private mortgage insurance company also noted that the decline in home prices is only about one-third to a half over, thanks largely to the imbalance of supply and demand.
Despite calling the economic downturn “both short and modest,” Berson said the S&P/Case-Shiller house price index could decline by roughly 15-25 percent, while the OFHEO index could decline by a lesser 5-10 percent because it excludes jumbo loans and most subprime and Alt-A loans that the GSEs don’t cover.
Berson said he expects the housing market to stabilize at some point in the second half of the year as a result of expanded monetary and fiscal policy, but believes home prices will continue to decline “well into 2009,” as large inventories will remain.
See the full report here.