Even in the face of war, the odds of a national real estate bubble bursting and pushing home prices down is not much more than one in 20.

The likelihood of significant home price declines over the next two years, as represented by the PMI Risk Index, recently declined 16 points in a quarter-to-quarter measurement while rising one point in a year-to-year comparison.

The index recently released by PMI Mortgage Insurance Co. of Walnut Creek, a subsidiary of The PMI Group, Inc. rose one percentage point from November 2001 to November 2002 and dropped from the second to the third quarter last year 16 points, in both cases to 110.

The index reveals the average probability of home price declines greater than 10 percent for the 274 metropolitan statistical areas (MSAs) tracked by PMI is about 5.94 percent within the next two years. That's about a 1 in 17 chance that a national real estate bubble will go bust.

PMI analysts and a growing number of others say housing remains strong for several basic reasons: demand from first-time home buyers who are often immigrants, limited housing supplies in many regions, rising incomes and falling mortgage rates.

"There is enough excess demand for housing to fuel increases even through a war," says Michael Carney, a professor of finance and real estate, and director of the Real Estate Research Council at Cal-Poly University, Pomona, CA.

"War tends to be a negative factor in home prices, but there won't be an discernible, measurable or identifiable effect of the war on home prices this time around," he added.

PMI uses the PMI Risk Index to assess and manage risk levels in its own mortgage insurance portfolio and bases the index on certain measures of economic activity and conditions, including the Office of Federal Housing Enterprise Oversight's (OFHEO) House Price Index and labor market statistics from the Federal Bureau of Labor Statistics.

The index is, however, a lagging indicator, last tabulated for November 2002 when there weren't a quarter of a million U.S. military troops amassed for war with Iraq. War, some speculate, could create more deficit spending which will in turn spawn inflation including higher mortgage interest rates. That could put a damper on home prices.

"The sooner the war is over, the better for economy. The impact on mortgage rates? It's hard to see them go much lower, but it's hard to see them go much higher than 7 percent," said Leslie Appleton-Young, an economist with the California Association of Realtors.

While the national PMI index risk average is 110, California yields three cities with much higher indexes. They are among 10 metropolitan areas which PMI considers "high risk" areas -- areas with greater potential for bubble bursting activity. They are considered riskier areas because of their economic dependence on the long suffering information technology industry.

They are Austin-San Marcos, TX (241); Dallas, TX (207); San Jose, CA (199), Portland, OR-Vancouver, WA (178); Denver, CO (160); Salt Lake City-Ogden, UT (153); Phoenix, AZ (148); Seattle-Bellevue-Everett, WA (139); Oakland, CA (128); and San Francisco, CA (105).

Despite several high risk areas in the Golden State, California's experts generally disregard any idea of of a bubble bursting and suggest any future deflation will be a more of a slow, temporary hiss rather than a sudden pop.

"Here's the thing: In terms of deficit spending we've been deficit spending since Sept. 11 (2001) and budgets have been submitted with deficit spending, yet still the rates have continued to go down. It's an absolute conundrum to me that the market has maintained and is actually at the point where it is now," said Mike Donohoe, president of the Santa Clara County Association of Realtors and broker- owner of Silver Creek Financial in San Jose, CA.

There's also the chronic supply-demand conditions that plague California and tend to keep home prices high.