PMI: >50% Chance of home price declines

From the PMI Group:

PMI’s Fall 2006 Risk Index Reflects Anticipated Housing Market Slowdown

Rapidly slowing appreciation and declining affordability contributed to a marked increase in the risk of home price declines in cities across the country, PMI Mortgage Insurance Co., the U.S. subsidiary of The PMI Group, Inc. (NYSE: PMI) reported today, but strong economic fundamentals continue to underpin many areas. PMI U.S. Market Risk Index(SM) scores increased for all of the nation’s 50 largest metropolitan statistical areas (MSAs), resulting in an increase in the average score from 288 to 328, which translates into a 32.8 percent chance that home prices will decline in the next two years. Eighteen MSAs face a greater than 50 percent chance that home prices will decline, up from 13 MSAs last quarter.
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While year-over-year appreciation remained in the double digits in 20 MSAs and topped 20 percent in four — Phoenix, AZ and Orlando, Miami, and Tampa, FL — the rate of appreciation slowed in 41 of the 50 largest MSAs. In 13 areas, appreciation dropped below the historical norm of roughly 4 to 6 percent. Detroit recorded the only year-over-year decline among the top 50 MSAs, of 0.61 percent.

The risk of price declines continues to be concentrated in California and along the Eastern Seaboard. Of the 18 MSAs facing a greater than 50 percent chance of a price decline, eight are in California (San Diego, Sacramento, Oakland, Santa Ana, Riverside, Los Angeles, San Jose, and San Francisco) and eight are in the northeast (Nassau-Suffolk and New York, NY, Boston and Cambridge, MA, Providence, RI, Edison and Newark, NJ, and Washington, DC). The remaining two are Fort Lauderdale, FL and Las Vegas, NV.

Chance of a declines in the next two years: