One of the most accurate forecasters of housing value movements has just signaled something potentially important: For the first time in a year, according to the national PMI index, “overall risk has decreased” in the 384 metropolitan markets covered by the survey.

The PMI risk index is produced quarterly by private mortgage insurance giant, PMI Group. It examines local employment, household income, economic growth, demographic changes and other factors to predict where home values are headed in these market areas.

PMI's risk index was among the earliest warning bells about the housing crash, so its quarterly findings are followed closely by mortgage analysts. According to the latest index released last week, home values are increasing in dozens of major metropolitan markets, causing the average risk rating for the U.S. to drop by 2.6 percent.

That's not huge, but it's a directional signal. The index found risk levels elevated in the so-called “sand states” -- California, Florida, Nevada and Arizona. It also documented a slight worsening of affordability conditions in 81 percent of metropolitan markets -- mainly the result of the uptick in home prices and slightly higher average mortgage interest rates late last year.

Another key market barometer was released last week with at least mildly encouraging numbers: The Zillow index of home owner negative equity found that the national average rate dropped to 21.4 percent in the last quarter of 2009, down from 23 percent in the second quarter.

Also the Federal Reserve's quarterly study measuring the nation's finances - the so-called “flow of funds” report, found that after nearly three years of declines, Americans are building positive equity in their homes again.

Between the first quarter of last year and the third quarter, according to the Fed, homeowner equity increased by almost $1 trillion. That was caused primarily by a combination of rising home values and principal paydowns on mortgages.

Meanwhile, home builders are also reporting an easing of their multi-year tale of woe: Several major publicly-traded national builders, including D R Horton and Beazer, announced last week that they are seeing higher numbers of orders along with reduced cancellation rates on contracts.

Horton said in its most recent quarter, orders for new homes were 45 percent above year-earlier levels, and the cancellation rate dropped from 38 percent to 26 percent.

Mortgage rates continue to be helpful as well: Thirty year fixed rates dropped to 4.9 percent last week, according to the Mortgage Bankers Association. Fifteen year rates remained flat at 4.3 percent.

Published: February 15, 2010

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consumer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.