U.S. home prices, already down 23 percent from their July 2006 peak, will continue to fall until the third quarter of next year, PMI Mortgage Insurance Co. said in a report.
Ninety-seven percent of the 381 U.S. metropolitan areas surveyed are likely to have lower home prices in September 2010, according to the Walnut Creek, California-based insurer’s Market Risk Index, which assigns a score to every region based on the likelihood real estate values will be lower 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,” David Berson, PMI’s chief economist and strategist, said in a statement.
The three-year-old housing recession has spurred a credit crisis that’s making it harder for borrowers to qualify for home loans. With home values tumbling, homeowners who are unable to refinance or sell have pushed the U.S. foreclosure rate to a post-World War II high. The lending crunch has, in turn, made it more difficult for companies to pay their bills, driving the jobless rate to a 15-year high.
Home prices will fall another 15 percent, according to economists Michelle Meyer and Julia Coronado of Barclays Capital Inc. in New York.
From PMI via PRNewswire:
PMI Mortgage Insurance Co., (NYSE: PMI), 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.”