Saturday, April 08, 2006

PMI Market Risk Index & Real Estate Trends

The PMI Group released their quarterly Economic and Real Estate Trends Report this past week:

Economic and Real Estate Trends - Spring 2006

Included is their Market Risk Index. NJ still ranks up near the top with an approximate 50% chance of market decline.

Edison, NJ MSA - 51.6%
New York-Wayne-White Plains, NY-NJ MSA - 50.6%
Newark-Union, NJ-PA - 42.7%

To get a feel against how other bubble markets ranked in their index, Las Vegas-Paradise, NV came in at 45.7%, so it's clear we're amongst the riskiest of markets.

The report also contains an article on homeownership, I won't copy it all in here, but I'd like to take just one snippet that I found interesting..

I have my own story to tell in this regard. I’m one of the unlucky ones: in 1989, I bought a home in Los Angeles—right before the bottom fell out of the market. When I got a job in another city and sold seven years later, I lost my down payment and everything I’d put in since, and I even wrote a check to the bank for a little bit extra.
As the PMI Risk Index shows, some regions of the US face a significant probability of price declines. This is something to consider, particularly if you’re investing for the short term.

Caveat Emptor!


Anonymous Anonymous said...

If that report has merit then there is a 50% chance of no decline in sales prices in the next two years.

How does that fit with the predictions often voiced here that it is almost certain that there will be significant decrease in prices, and the only argument is over what percentage? (I am not being a wise guy. I'm looking for some insight.)

4/08/2006 04:04:00 PM  
Anonymous Anonymous said...

a 50% chance is much different then prices only go up.

4/08/2006 09:28:00 PM  
Anonymous Anonymous said...

The prices are going down because rates are up, loan standards are tightening and loan losses going to skyrocket thus lenders will pull back dramatically from sub-prime idiot loans.

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