PMI Group Ranks Texas Markets As Most Stable In The U.S.
January 14, 2009
Winter 2009 PMI U.S. Market Risk Index (3rd Quarter 2008)
10 Riskiest and 10 Most Stable MSAs out of 50 Largest MSAs
10 Riskiest of the 50 Largest MSAs 10 Most Stable of the 50 Largest MSAs
Afford- Afford-
Risk Risk ability Risk Risk ability
Rank MSA Index Index Rank MSA Index Index
High Riverside-San Bern.- 99.9 89.04 Minimal Dallas-Plano- <1 129.85
Ontario; CA Irving; TX
High Miami-Miami Beach- 99.9 88.23 Minimal Fort Worth- <1 132.60
Kendall; FL Arlington; TX
High Ft. Lauderdale- 99.8 93.33 Minimal Houston-Sugar <1 130.14
Pompano Beach- Land-Baytown;
Deerfield Beach; FL TX
High Los Angeles-Long 99.8 89.86 Minimal Pittsburgh; PA <1 131.87
Beach-Glendale; CA
High W. Palm Beach-Boca 99.6 102.11 Minimal San Antonio; 1.0 120.62
Raton-Boynton Bch; FL TX
High Las Vegas-Paradise; 99.4 122.23 Minimal Charlotte- 2.2 127.47
NV Gastonia-
Concord; NC-SC
High Tampa-St. 99.2 98.03 Minimal Columbus; OH 2.8 137.78
Petersburg-
Clearwater; FL
High Orlando-Kissimmee; FL 98.7 100.06 Minimal Cleveland- 3.4 156.48
Elyria-
Mentor; OH 3.9 128.53
High Santa Ana- 98.3 91.71 Minimal Indianapolis
Anaheim-Irvine; CA -Carmel; IN
High Jacksonville; FL 97.3 95.95 Minimal Denver- 4.1 115.06
Aurora; CO
PMI Mortgage Insurance Co., today released its Winter 2009 Economic and Real Estate Trends Report, and its widely cited U.S. Market Risk Index(SM). The index shows that the risk of lower house prices two years from now increased broadly across the nation — rising in 369 of 381 MSAs (Metropolitan Statistical Areas) or 97 percent — highlighting the breath of the economic and housing downturns.
PMI estimates that half of the nation’s 50 largest MSAs have an elevated or high probability of seeing lower house prices by the end of the third quarter of 2010, relative to the third quarter of 2008. A growing number of MSAs in the Industrial Midwest and along the East Coast show an increase in probability of lower home prices in two years.
“The two primary drivers of increased risk scores across a broader segment of MSAs are the continued high level of foreclosures and rising unemployment,” said David Berson, PMI’s Chief Economist and Strategist. “These factors will put additional upward pressure on risk, with increases in affordability and lower mortgage rates providing some offset.”
PMI’s U.S. Market Risk Index(SM) ranks the nation’s 381 largest MSAs according to the likelihood that home prices will be lower in two years. Risk scores translate directly into an estimated percentage risk that home prices will be lower in two years. The Risk 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. Among the nation’s 50 largest MSAs, 23 had a risk score exceeding 50, indicating a greater than 50 percent chance of prices being lower in those markets in 2 years.
In an effort to enhance forecasting accuracy, the Winter 2009 Risk Index incorporates a new home price index. PMI now bases its estimates on the more precise MSA-level Repeat Transaction Home Price Index from Loan Performance (a division of First American CoreLogic, Inc.). Previously the company based its estimates on Federal Housing Finance Agency (FHFA, formerly the Office of Federal Housing Enterprise Oversight, OFHEO) data. This change better reflects the breadth of mortgage market transactions and eliminates any bias on home prices resulting from the inclusion of refinancing activity. PMI also moved from utilizing state-based measures of mortgage foreclosure activity to MSA-based data to better reflect the impact on house prices from foreclosures at the local level. A complete copy of the Winter 2009 PMI 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/eret.
Housing affordability was little changed in the third quarter from the second, caused mostly by a slowing in personal income growth in response to rising unemployment rates as the recession deepened. Moreover, mortgage rates were higher in most of the third quarter as the credit crunch worsened. PMI’s proprietary Affordability Index measures today’s housing affordability in a given MSA relative to its 1995 baseline. An Affordability Index score exceeding 100 indicates that homes have become more affordable; a score below 100 means they are less affordable.
For all 381 MSAs, the weighted average Affordability Index reading was 114.5 in the third quarter, compared with the second quarter reading of 115.5. Across the nation, 62 percent of the MSAs showed marginally lower affordability. Affordability improved slightly, however, in 59 percent of the 100 MSAs ranked in the two highest risk classifications, mostly in response to sharply falling house prices — which averaged a 14.0 percent decline from a year-earlier, far exceeding the drop in income growth over the period.
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