JANUARY 13, 2009, 9:07 P.M. ET
Home prices are likely to be lower in two years in more than one-quarter of the nation's housing markets, according to a new study by mortgage insurer PMI Group Inc.
The study "tells us ... that we are far from a rebound in prices," says PMI chief economist David Berson. The risk that home prices will be lower in the third quarter of 2010 increased in 97% of 381 metro areas, according to the PMI analysis, though in many markets that risk remains relatively low.
The markets with the greatest risk that home prices will be lower in two years include California's Inland Empire, the greater Miami area, Lake Havasu City-Kingman, Ariz., and Cape Coral-Fort Myers, Fla. Metro areas with the lowest chance of price declines include the Dallas-Fort Worth area, greater Houston and Pittsburgh.
In developing its risk index, PMI considers recent trends in home prices, housing affordability, unemployment rates and foreclosures, among other factors. The study included data through the third-quarter, but there was little sign of improvement since then, Mr. Berson says. Falling mortgage rates were a plus for the housing market, he says, "but offsetting that is the fact that unemployment rates are up everywhere, home prices fell further in the fourth quarter and the foreclosure rates probably increased in most places."
—Ruth Simon