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.

Published: April 11, 2008

Use of this article without permission is a violation of federal copyright laws.

Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.