PMI Second Quarter 2010 Risk Index Shows Fresh Evidence of Nation's Recovering Housing Markets

WALNUT CREEK, Calif., May 3 /PRNewswire-FirstCall/ -- The PMI Mortgage Insurance Co. PMI's second quarter U.S. Market Risk Index (using 4th quarter 2009 data) showed fresh evidence of a recovering national housing market, and the prospect of higher housing prices in many markets within two years.  Key findings include:  

356 of Nation's MSAs Now Less Risky

• Of the nation's 384 MSAs (Metropolitan Statistical Areas), 356 had a declining Risk Score, with only one showing a slight increase and the remainder unchanged.
• The number of MSAs in the riskiest category (90 – 100) fell by 26.4% during the fourth quarter, while those in the least risky (0 – 10) increased by 79%.  
• In addition, the number of MSAs with a Risk Score of less than 50, suggesting better than even odds of higher housing prices in two years, increased 26.5% to 186 from 147 in the prior quarter. The number having a score over 50, indicating better odds of lower prices, fell by 16.5% from 237 to 198.

Nation's Top 50 MSAs

• While a significant number of the Top 50 MSAs remained in the riskier categories, with 64% still having a greater than 50% chance of lower prices by the end of 2011, that figure is down from 82% in the previous quarter.  
• In addition, 40% of these MSAs showed a score improvement of 20% or more.  
• Although the Risk Index does not measure the magnitude of future declines, the forecast does provide encouraging signs for moderating probabilities of price declines for the remainder of 2010 and into 2011 among these largest MSAs.  
• Another encouraging sign for these most populous MSAs is that 18, or 36%, also have Risk Scores less than 50, up from 20% in the prior quarter, indicating a probability of higher prices in two years.  

A combination of factors is leading to decreases in the risk of lower housing prices in two years in many MSAs. These factors include increasing affordability, generally improving mortgage credit quality, decreasing foreclosure rates, and a drop in excess housing supply.  

"Housing affordability continued to climb, and in some MSAs is at or near record levels," said David Berson, PMI Chief Economist and Strategist. "House prices have dropped sharply relative to incomes in most areas suggesting that prices have fully, or more than fully, adjusted for their unsustainable increases during the housing boom."

For all 384 MSAs, the average Affordability Index reading was 140.8 in the fourth quarter of 2009, compared with a reading of 133.9 for the third quarter.  Across the nation, approximately 98% of the 384 MSAs showed higher affordability.  PMI's proprietary Affordability Index measures today's housing affordability in a given MSA relative to a 1995 baseline.  An Affordability Index score exceeding 100 indicates that homes have become more affordable; a score below 100 means they are relatively less affordable.  

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.

A complete copy of the PMI Second Quarter 2010 Economic and Real Estate Trends(SM) (ERET) report and Appendix that provides data for all 384 U.S. MSAs is available at: http://www.pmi-us.com/eret.  

About The PMI Group, Inc.

The PMI Group, Inc. (NYSE: PMI), 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, including PMI Mortgage Insurance Co., PMI offers residential mortgage insurance and credit enhancement products.

Cautionary Statement: Cautionary Statement: Statements that relate to future performance, events or plans are "forward-looking" statements. Readers are cautioned that forward-looking statements by their nature involve risk and uncertainty. Many factors could cause actual results and developments to differ materially from those expressed or implied by forward-looking statements. Such factors include, among others, national or regional recessions, credit market disruptions, changes in interest rates, housing prices and employment rates, and regulatory and legislative developments.  PMI undertakes no obligation to update forward-looking statements.

SOURCE The PMI Mortgage Insurance Co.