PMI Predicts Which Housing Markets Are Most Stable
July 7, 2009
PMI Mortgage Insurance Co., today released its Second Quarter 2009 Economic and Real Estate Trends Report, and its widely cited U.S. Market Risk Index(SM). The quarterly report projects the likelihood that the nation’s housing prices will be lower in two years. As many as 324 – approximately 85% – of the nation’s 381 MSAs (Metropolitan Statistical Areas) are now facing increased risk of lower home prices in 2011. 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 fifty most populous MSAs, 28 of the Top 50 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 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,” said 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 homebuyers back into the market.”
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. Across the nation, approximately 98% of the 381 MSAs showed higher affordability. PMI’s proprietary Affordability Index measures today’s housing affordability in a given MSA relative to a 1995 baseline. An Affordability Index score exceeding 100 indicates that homes have become more affordable; a score below 100 means they are relatively less affordable.
PMI’s U.S. Market Risk Index(SM) ranks the nation’s 50 largest metropolitan statistical areas (MSAs) and uses economic, housing, and mortgage market factors (home price appreciation, employment, affordability, excess housing supply, interest rates, and foreclosure activity). Risk scores translate directly into a probability (ranging from zero to 100) that the price of homes in a given MSA will on average be lower at the end of the next two years.
A complete copy of the PMI Second Quarter 2009 Economic and Real Estate Trends(SM) (ERET) report and Appendix that provides data for all 381 U.S. MSAs is available at: http://www.pmi-us.com/econ.
Second Quarter 2009 PMI U.S. Market Risk Index (First Quarter 2009 data)
10 Riskiest and 10 Most Stable MSAs out of 50 Largest MSAs
10 Riskiest of the 50 Largest MSAs
Risk Risk Affordability
Rank MSA Index Index
High Riverside-San Bernardino-Ontario, CA 99.9 114.95
High Miami-Miami Beach-Kendall, FL 99.9 115.90
High Los Angeles-Long Beach-Glendale, CA 99.9 113.65
High Fort Lauderdale-Pompano Beach-
Deerfield Beach, FL 99.9 122.03
High Las Vegas-Paradise, NV 99.9 160.34
High West Palm Beach-Boca Raton-
Boynton Beach, FL 99.9 134.18
High Orlando-Kissimmee, FL 99.9 127.06
High Tampa-St. Petersburg-Clearwater, FL 99.9 126.57
High Santa Ana-Anaheim-Irvine, CA 99.9 114.12
High Phoenix-Mesa-Scottsdale, AZ 99.9 134.59
10 Most Stable of the 50 Largest MSAs
Risk Risk Affordability
Rank MSA Index Index
Minimal Cleveland-Elyria-Mentor, OH 1.5 204.18
Minimal Pittsburgh, PA 1.5 155.54
Minimal Columbus, OH 2.1 178.41
Minimal San Antonio, TX 2.8 135.92
Minimal Houston-Sugar Land-Baytown, TX 3.7 146.83
Minimal Dallas-Plano-Irving, TX 3.8 141.54
Minimal Fort Worth-Arlington, TX 5.8 142.93
Low St. Louis, MO 12.9 146.90
Low Charlotte-Gastonia-Concord, NC-SC 15.0 143.11
Low Nashville-Davidson-Murfreesboro-
Franklin, TN 16.6 135.47
