PMI Group's Q3 U.S. Market Risk Index, measuring the risk of home-price declines using Q1 2010 data, fell to 51.9 from 53.8 in Q4 2009
WALNUT CREEK, California
August 10, 2010
– The PMI Group, Inc. (NYSE:PMI - News) announced today that PMI's third quarter U.S. Market Risk Index (using 1st quarter 2010 data) dropped to 51.9 from 53.8, the third consecutive quarterly decrease. However, the number of Metropolitan Statistical Areas (MSAs) with lower risk scores declined compared with the previous quarter, reflecting a decrease in affordability and higher mortgage rates during the 1st quarter of 2010 compared with the end of 2009.
Although 290 (75.5 percent) of the nation's MSAs are less risky than the previous quarter, more than half (51.6 percent) are still in the high-risk category. Generally, the high-risk MSAs had higher unemployment rates, higher new foreclosure rates, lower affordability, a larger excess housing supply and more volatile housing prices compared with the MSAs in the minimal to moderate risk categories.
The Nation's Top 50 MSAs
* 28 had a risk score exceeding 70, placing them in the highest risk category.
* Seven had risk scores between 50 and 70, giving them an elevated risk designation.
* Six had moderate risk scores between 30 and 50.
* Eight were deemed low risk with scores between 10 and 30.
* One, Columbus Ohio, had a minimal risk score of below 10.
PMI's U.S. Market Risk Index(SM) uses economic, housing, and mortgage market factors, such as home price appreciation, employment, affordability, excess housing supply, interest rates, and foreclosure activity in assessing the risk of price declines in that nation's MSAs. Risk scores translate directly into a probability (ranging from zero to 100) that the price of homes in a given MSA will on average be lower at the end of the next two years.
In Florida and Nevada, Risk Index scores remained in the 90s -- the high 90s in many MSAs. New Jersey and Arizona also had very high-risk scores in the first quarter. In California, 25 of its 28 MSAs had lower risk scores in the 1st quarter of 2010, compared with the 4th quarter of 2009.
"Household formation is the most important demographic driver of housing demand and faster growth, as has occurred over the period since the middle of 2009 corresponding to a pickup in the economy, should lead to greater market stability," said David Berson, PMI chief economist and strategist. "Ultimately greater stability of house prices will lead to declines in the Risk Index."
About The PMI Group, Inc.
The PMI Group, Inc. (NYSE:PMI - News), headquartered in Walnut Creek, CA, provides credit enhancement solutions that expand homeownership while supporting our customers and the communities they serve. Through its wholly and partially owned subsidiaries, PMI offers residential mortgage insurance and credit enhancement products.