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Housing Markets at Risk of Price Declines, Median Risk Index Value Increases 11.6%

Strategic Insights

— 2 min read

The US housing market remains at risk, with numerous large markets facing potential price declines. According to the PMI U.S. Market Risk Index, the median Risk Index value has increased 11.6 percent, from 120 to 134. This indicates a heightened likelihood of price declines in the coming years, with the top markets at risk including Boston, MA, San Diego, CA, and Long Island, NY.

Key Takeaways:

  • The PMI U.S. Market Risk Index indicates a 21.8 percent probability of an overall house price decline in the nation's 50 largest housing markets within the next two years.
  • Boston, MA, San Diego, CA, and Long Island, NY top the Risk Index list with a greater than 50 percent chance of experiencing price declines.
  • The median Risk Index value increased 11.6 percent, from 120 to 134, indicating a heightened likelihood of price declines in numerous large markets.
  • Nationwide, there exists a 21.8 percent probability of an overall house price decline, up slightly from 21.3 percent last quarter.
  • Los Angeles, Sacramento, and Riverside are at the top of the new Valuation Index, indicating that home prices in these markets are overvalued by 33.7%, 31.3%, and 30.7% respectively.
  • Half of the nation's 50 largest housing markets are overvalued by 10 percent or more, with three markets overvalued by 30 percent or more and 11 markets overvalued by 20 percent or more.
  • Boston, MA, San Diego, CA, and Long Island, NY continue to top the Market Risk Index with scores of 551, 536, and 532, respectively.

Statistics:

  • The PMI U.S. Market Risk Index has a median score of 134, representing an 11.6 percent increase from the previous quarter.
  • The nationwide probability of a house price decline within the next two years is 21.8 percent, up from 21.3 percent in the previous quarter.
  • Of the 50 largest housing markets, 25 are overvalued by 10 percent or more, with 3 markets overvalued by 30 percent or more.
  • Los Angeles, Sacramento, and Riverside are overvalued by 33.7%, 31.3%, and 30.7%, respectively.
  • The top 5 most overvalued markets are Los Angeles (33.7%), Sacramento (31.3%), Riverside (30.7%), San Diego (28.1%), and Santa Ana (27.5%).

Sources:

  • PMI Mortgage Insurance Co.
  • The PMI Group, Inc. (NYSE:PMI)
  • Office of Federal Housing Enterprise Oversight (OFHEO)
  • Bureau of Labor Statistics
  • Bureau of Economic Analysis (BEA)
  • U.S. Census
  • PMI Economic and Real Estate Trends (ERET) Report
  • PMI Mortgage Insurance Co. press release

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