It's bad news for homeowners with private mortgage insurance (PMI) payments to help them swing larger mortgages to get them into their homes. Risk of declining prices is on the rise, dashing hopes that rising home prices would let them out of their insurance payments earlier.

PMI Mortgage Insurance Company tracks housing prices, and reports that despite stronger economic fundamentals in job growth, affordability is forcing high home prices to come down.

According to the PMI's Winter 2007 Risk Index, which tracks home prices and risk of decline in the nation's 50 largest metropolitan statistical areas (MSAs,) risk increased for 34 of those areas. With an average score rising from 328 to 342, there is a 34.2 percent chance that home prices will decline in two years in those areas. Nineteen MSAs face a greater than 50 percent chance that home prices will decline, up from 18 last quarter.

The Risk Index isn't based on what you may think it is -- that too many people are getting loans with PMI. The risk factors instead are broad market indicators such as employment and the economy as a whole, explains Josh Wozman, spokesperson for The PMI Group, Inc.

"It's not about loans -- this is about home price appreciation and depreciation," explains Wozman, "not about risk in our business (underwriting and insuring loans), but this speaks to a number of factors in certain MSAs and those factors are employment data, home price appreciation, etc."

The Group uses the data, says Wozman, to determine which MSAs are more risky to insure loans.

So the Risk Index isn't necessarily a tool for homebuyers to use, it's a measure for insurers. In fact, declining prices, coupled with low interest rates suggest that it's an excellent time for buyers to jump into the market.

"Years of rapid appreciation have made homes less affordable in many areas, and that's not sustainable over the long term, so what we are seeing is not unexpected," said Mark F. Milner, Chief Risk Officer of PMI Mortgage Insurance Co. "Over time, moderating appreciation will bring prices back in line with economic fundamentals, particularly incomes, bringing the market back to a healthy balance."

Yet, the news isn't all bad -- year-over-year appreciation remained in the double digits in 14 of the 50 largest MSAs, while the rate of appreciation slowed in 43, and overall, says the Index, the risk of price declines continues to be balanced by strong economic fundamentals such as job growth and low unemployment.

Hardest hit with price declines, says the Index were California with 8 MSAs, the Northeast with 8 MSAs and 2 MSAs in Florida. Three MSAs-Detroit and neighboring Warren, MI, and Cambridge, MA, saw slight year over year price declines.

In most areas, with the exception of the upper Midwest, also known as the Rust Belt where auto industry woes have hurt employment and housing prices, unemployment remains low and job growth is positive. Of the top 50 MSAs all but four-Detroit and Warren, MI, Cleveland, OH, and Indianapolis, IN, saw employment growth. New Orleans led the nation in employment growth at 8.37 percent over the past year, followed closely by Las Vegas, NV, at 5.38 percent.

To tabulate the data, PMI looks at its own PMI U.S. Market Risk Index that shows risk of price declines, PMI's Fall 2006 Economic and Real Estate Trends(SM) which examines major regional trends, and statistics commonly used to judge the housing market's current health and future prospects such as unemployment and job growth.