The just-released PMI Spring 2008 U.S. Market Risk Index ranks 50 of the largest metropolitan statistical areas (MSAs,) and calculates that home prices will likely be higher in some areas, and lower in others. Overall, prices will be lower in two years in 381 of the largest MSAs, and MSADs.

"Excess supply is responsible for much of the risk we're seeing in the market," says David W. Berson, chief economist and strategist for The PMI Group. "The excess supply of housing in the United States is 9.2 months for existing homes (the 20-year average has been 6) and 9.8 months for new homes (the 20-year average has been 5.5), which will continue to depress prices for MSAs in risk ranks 1 and 2."

"Risk Ranks" are the MSAs with the highest risk of home price depreciation, including most of the usual suspects - Las Vegas, Orlando, Phoenix, Los Angeles, San Diego, Tampa, and Miami MSAs, among others. The calculations are extrapolated on the previous quarter's figures ( 4th quarter, 2007 ) from the Office of Federal Housing Enterprise Oversight, labor market figures from the Bureau of Labor Statistics, and the PMI Affordability Index, using local per capita household income, home price appreciation, and a blended mortgage rate to calculate the local share of mortgage payment to income relative to its baseline year of 1995.

Risk continues to increase in states where price growth dramatically exceeded historical norms, notes PMI, and risk has begun to decline in areas where prices grew at a sustainable rate, such as Dallas, Fort Worth, Austin, Portland, Seattle, Philadelphia, St. Louis, and Cincinnati, among others.

One advantage to lower prices is that housing affordability improves, ring the fourth quarter, according to PMI's proprietary Affordability Index(SM), which measures how affordable homes are today in a given MSA relative to a baseline of 1995. An Affordability Index score exceeding 100 indicates that homes have become more affordable while a score below 100 means they are less affordable. Nationally, the weighted average affordability index reading was 106.62 in the fourth quarter of 2008, compared with the third quarter reading of 104.25. All told, some 311 MSAs saw improvements in affordability while the remaining 70 were either unchanged or showed a decline.

The PMI U.S. Market Risk Index scale ranges from one to 100 and translates to a percentage. For example, a score of 50 indicates a 50 percent chance that home prices will be lower in two years.

For a complete outlook, visit PMI Insurance online. And remember, real estate is local. Your MSA may be up or down, but your home price may be moving in the opposite direction. To be sure, talk to a real estate professional.