PMI Group, one of the nation’s largest insurers of home mortgages, says there are five areas of the country with a risk of price declines over 50%. All are in the Northeast or California. Boston continues to lead the list with a 55% chance of price declines. San Diego, with a 53.6% chance, has jumped over Long Island with 53.2%. Pittsburgh is last at 5.4%. PMI has also introduced a valuation index that shows where home prices are estimated to be overvalued. Los Angeles leads the list with an overvaluation of 33.7%. Next comes Sacramento, at 31.3%, and Riverside, Calif. with 30.7%.
“House prices are sticky, so moving to another phase in the real estate cycle can be a slow process,” explains Mark Milner, chief risk officer with PMI Mortgage Insurance Co. “We believe that over the medium to long term, prices will move into better alignment with local economic factors, in particular income.”
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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.