Friday, January 18, 2008

What's Your Risk?

Mortgage insurers PMI published their latest home-price risk study … and guess who’s near the top? PMI economists juggle price momentum, affordability, regional economics and mortgage-payment problems to come up with their index, that translates to chance of home-price declines in the next two years in the 50 top U.S. markets. Here’s the dirty dozen, PMI’s riskiest …

1. Riverside-San Bernardino-Ontario, CA – 94%
2. Las Vegas-Paradise, NV – 89%
3. Phoenix-Mesa-Scottdale, AZ – 83%
4. Santa Ana-Anaheim-Irvine, CA – 81%
5. Los Angeles-Long Beach-Glendale, CA – 79%
6. Fort Lauderdale-Pompano Beach-Deerfield Beach, FL – 78%
7. Orlando-Kissimmee, FL – 74%
8. Sacramento-Arden-Arcade-Roseville, CA – 73%
9. Tampa-St. Petersburg-Clearwater, FL – 72%
10. West Palm Beach-Boca Raton-Boynton Beach, FL – 71%
11. San Diego-Carlsbad-San Marcos, CA – 69%
12. Oakland-Fremont-Hayward, CA – 65%

… 17. Washington-Arlington-Alexandria, DC-VA-MD-WV – 37%

PMI says: “Are we nearing the end of the current housing downturn? We don’t think so, given the magnitude of the run up in housing (with no significant housing downturn since the recession of 1991–92). That doesn’t mean that the level of housing activity has to fall to 1992 levels—after all there are almost 22 million more households today than there were back then, with higher income levels and lower unemployment rates. But the unsustainable surge of 2002–05 has to be worked off, and that’s what’s going on in the housing market today. The famous economist Herb Stein once noted, ‘If something cannot go on forever, it will stop.’ That is probably the best way to view the housing market today. We know that given the combination of demographics, job and income growth, and the level of interest rates, housing demand can’t fall without bounds.”

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