PMI Reports on U.S. Market Risk Index – Phoenix at #11

by Jay Thompson on July 7, 2008 · Comments

in Market Conditions, National News

House Price Risk - PMI Summer 2008

Last week, PMI Mortgage Insurance Co released its Summer 2008 U.S. Market Risk Index, which ranks the nation’s 50 largest metropolitan statistical areas (MSAs) according to the likelihood that home prices will be lower in two years.

The bad news? The Phoenix real estate market has (according to PMI) a 79.6 percent probability of home prices declining over the next two years. This places Phoenix at #11 (and be glad you’re not in Riverside-San Bernadino–Ontario California which sports a whopping 95.5% Risk Index…).

The good news? That’s down from an 82.3% chance in Q4 2007. Overall, 35 of the nation’s 50 largest MSAs and 326 out of all 381 MSAs experienced a decline in Risk Index since Q4 2007. In other, more cheery words, there seems to be less risk of home price declines than when last analyzed in late 2007.

Interestingly, Phoenix and Las Vegas were the only “high risk” MSAs to show a decline in Risk Index. California in fact showed an increased risk in 25 of their 28 MSAs. Ouch.

Of note: Phoenix continues to show a very low unemployment rate (3.67% in this report). High employment levels (or conversely, low unemployment rates) are generally considered a positive economic indicator and bode well for housing demand.

This is an interesting report, jammed full of data. The data is also summarized nicely, though they do say things like this:

But the picture of home price performance changes significantly if the 59 MSAs located in California, Florida, Nevada, and Arizona are removed from the total.

Statements like that are just beyond stupid. Of course things change significantly if you simply ignore 59 MSAs in the four hardest hit states. My college stats professor would be wanting to squish the numbskull that wrote that nugget. 

Here is a list of the Top 14 MSA’s with the greatest risk of declining home prices:

Risk Index Top 14

Linkage:

Here is the press release.

The entire Economic Real Estate Trends report in PDF format is available — Chart-o-holic alert!

And finally, here is the appendix listing the Risk Index for all 381 Metropolitan Statistical Areas. 

Go forth and absorb your daily dose of real estate statistics.

 


 

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  • I love the transparency Jay. Even though you are a Phoenix area broker you are still giving people the straight scoop. Preach it brother.
  • Jay,

    Thanks for bringing this report to my attention. I've heading over to write up some stats for St. Louis now. We're one of the lucky ones that only has a 1% of lower prices in 2 years. Of course, we never had the crazy appreciation of a few years ago that was found in the hardest hit states.

    And as much as I appreciate your frustration with the quote that if you removed the 4 hardest hit states that it would change the nationwide picture, it's an important point for those of us in the states that aren't one of those 4. The national media keeps hammering the story from the perspective of the hardest hit areas, and the buyers in my area get the impression that the sky is falling. With a 1% potentional for downward prices, it obviously isn't true. But how do we convince them when all they hear on the news are the horror stories.
  • Thanks for the heads up and very readable analysis. I've just incorporated the PMI news into my monthly Flagstaff analysis, and cited your blog in my post.
  • Karen - great point. And an example of why it's really not accurate (or important) to quote "nationwide statistics". Real estate is local. Even here in Arizona, which is mostly red in the map above, there are isolated pockets where home values and sales are OK.

    The old mantra, "all real estate is local" is certainly true.
  • Jay:
    This is some great information on the economy and housing markets. Thanks for being "Fair and Balanced" in your reporting about Phoenix, and for providing such a useful link. Thanks again.
  • Sorry to hear about your ranking and I am happy to see Honolulu is not on the list.
    Mahalo,
    Keahi
  • Mortgage Samson
    Florida and California are in the red, but the private mortgage insurers are the ones bleeding...
  • This is good info, I think the worst is behind most areas of the country. This report is good but I also remember seeing these from 3-4 years ago saying Tucson AZ was exactly neutral and prices were fine, or course that wasnt exactly correct, so I take these with a grain of salt. The real estate market is a lot like the stock market and is impossible to predict, although reports like this do help to understand it.
  • Hey I just thought that was a heat map showing the best places to live in the USA.

    On a more serious note it still looks like Florida and the southwest are still burning up. Good to see Phoenix made a slight improvement. Orlando went up a couple of percentage points or maybe that was just the mercury rising.
  • It's interesting that with this report and a lot of the other news in the national media that sales are up in a hard hit area like Daytona Beach, Florida. We have two definite markets here with 58% of our sales in the under $200,000 price range. Our sales for the second quarter are up 36% from the first quarter.

    Median prices have been pretty steady, but average prices have been up and down. With 259-287 sales per month for the area, average prices will move depending on how many high priced homes sell.

    Daytona (87.8) is worse off than Phoenix from the report, but sales are up. The high end is suffering, but people are buying. It's certainly an interesting time.
  • Thanks for sharing. Like the numbers for the Chicago market, will have to blog about it.

    It's interesting to me of those at the top of the list for most likely to have further depreciation how many of them have already seen huge price reductions over the last 2 years. Guess the downward trend isn't exactly over for those markets...then again they did have huge gains year over year.
  • Thanks for the link to the statistics. Great article and great information I will continue to visit to see what you have to say. Luckily our market in Jackson Hole is remaining fairly strong. In '07 we had 22 percent increase n property values . We expect much less this year.
    Thanks again,
    Rick
  • good day!

    It is very interesting that Phoenix and Las Vegas were the only “high risk” MSAs. Is this the real stats? This is a very interesting report.

    Thanks,
    Mark
  • Hello! Thank you very much for the post and for attaching the stats. Transparency always makes positive results. Thanks again!
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