11/01/05
PMI Mortgage Insurance Company reported October 18, 2005, that Greater Cincinnati area housing prices are expected to be among the nation’s most stable for the near future. The mortgage insurance company released its quarterly "U.S. Market Risk Index," which predicts the probability that home prices will decline in the next two years.
The report found that many of the nation’s largest housing markets face increasing risk of a price decline. It also found that homes in these markets are significantly overvalued. The analysis assesses housing affordability by comparing housing price increases in the 50 largest metropolitan areas to increases in regional and U.S. median household income. It found that half of these markets are overvalued by 10% or more and three are overvalued by 20% or more. "In riskier markets affordability has weakened over the past several quarters as house price appreciation diverged from economic fundamentals. With this quarter’s report we are seeing a continuation of that trend," said Marco van Akkeren, an economist with PMI Mortgage Insurance Co.
The nation’s least risky housing markets were Pittsburgh, PA, Indianapolis, IN, Memphis, TN, Cincinnati, OH, and Columbus, OH. The survey determined that there is a 5.8% chance that homes in the Greater Cincinnati area could decline in the next 2 years, but a 96% probability that homes will appreciate in value. According to the analysis, Greater Cincinnati is one of 11 markets where homes are undervalued, with current prices approximately 3.4% below actual valuation. The low likelihood of a price decline makes Cincinnati one of the nation’s most stable housing markets.
Topping the Risk Index were Boston, MA, San Diego, CA, Long Island, NY, Santa Ana, CA, and Oakland, CA. The index predicts a greater than 50% likelihood that housing prices will fall in these markets in the next two years. Nationwide, there exists a 21.8% probability of an overall house price decline within the next two years.
A complete copy of the latest PMI Economic and Real Estate Trends report is available at: the PMI Group's web site.