Tuesday, June 27, 2006

PMI Risk Index Jumps

From Reuters:

U.S. house price risk jumped in past year

Homes in about 30 percent of the top 50 U.S. house markets are at risk of losing value, up from about a fifth a year ago, according to an index prepared by mortgage insurer PMI Group Inc.

The average score of PMI's U.S. Market Risk Index for the top 50 metropolitan statistical areas, or MSAs, leaped 70 points this quarter to 288 from the year-ago period, PMI said in a statement on Tuesday.

This suggests homeowners face a 28.8 percent chance that prices on their houses will drop within two years, PMI said.
On a quarter-over-quarter basis, the average risk score for the top 50 MSAs increased 1 point, with results increasing in 25 areas and declining in 20, PMI said. Newark, New Jersey, and Miami led increases in the index with 32 point jumps, to 459 and 359, respectively, PMI said.

From the PMI Group:

PMI U.S. Market Risk Index Shows Hot Markets Continue to Cool

The U.S. Market Risk Index shows 13 MSAs continue to have risk scores above 500, meaning they face a 50 percent or greater risk of home price declines in the next two years. The average score for the riskiest markets was 573.

The average score for the top 50 MSAs increased to 288, a 70-point increase from a year ago. The biggest gains this quarter were not among MSAs at the top of the list but those in the middle. Newark, NJ and Miami, FL lead the pack with increases of 32 points each, bringing their Risk Index scores to 459 and 359, respectively.


Blogger grim said...

Here is the PMI report:

Economic Real Estate Trends - Summer 2006 (PDF)

6/27/2006 11:03:00 AM  
Anonymous Anonymous said...

Thanks Grim for all the data that you pump out.

6/27/2006 12:08:00 PM  
Blogger grim said...

For those that don't know what the PMI Risk Index means:

The Market Risk Index represents the probability of a decline in housing prices in that area in the next two years. For example, a Risk Index of 200 means that there is a 20% chance of price declines in the next two years.

Nassau-Suffolk, NY: 58.9%
Edison, NJ: 53.6%
New York-White Plains-Wayne, NJ-NY: 49.8%
Newark-Union, NJ-PA: 45.9%

For those who are very new, those names represent statistical areas called MSAs (Metropolitan Statistical Areas). More information on MSAs can be found at Wikipedia:

United States metropolitan area


6/27/2006 12:31:00 PM  
Blogger grim said...

From Reuters:

Toll cancellations higher than last qtr

Cancellation rates among U.S. home buyers are running above last quarter's levels as the housing market slows, the chief executive of luxury home builder Toll Brothers Inc. said on Tuesday.

"I think our cancellations are running higher than on the last call," Robert Toll said at the Reuters Real Estate Summit in New York.

Toll cited a perception among buyers, fueled partly by media coverage of the housing market, that homes are a depreciating asset. He also pointed to the supply of "speculative housing" as well as a national "malaise" caused by last autumn's hurricanes.

But he predicted buyers who sit out the current industry slowdown will regret their decision later, and said cancellation rates were likely to stabilize over the next six months.

"I think you're going to see a very strong housing market again," Toll said.

6/27/2006 01:30:00 PM  
Blogger Metroplexual said...


The FOMC is meeting tomorrow. Marketplace.com has an article speculating on 50 BPS uptick. What do you make of it? Am I going to get a better CD in July?

6/27/2006 02:37:00 PM  
Anonymous Anonymous said...

anyone see the cover of USA today? All about housing and affordability but saying housing will still increase by 5% this year. I do not know how to link the article

6/27/2006 02:37:00 PM  
Blogger DC Housing News said...


New blog on our nation's capital's overpriced real estate market, and othe news. Enjoy.

6/27/2006 02:39:00 PM  
Blogger grim said...

The FOMC meeting is a two day meeting. While it begins tomorrow, we won't see a policy statement until Thursday afternoon.

There have been plenty of pieces speculating on a 50bp uptick since it was mentioned in the last set of minutes. Probability?

Fed Funds Rate Predictions

Looks like the probability of a 50 bips move is around 10% (as of yesterday). Probability of a 25 bips move roughly 90%.

Probability of another 25 bps move in August is around 60%.


6/27/2006 02:46:00 PM  
Blogger RentinginNJ said...

All about housing and affordability but saying housing will still increase by 5% this year

Yup. I read that too. Other than that, the article was actually pretty good. The 5% comes from NAR. The problem that I have is that this number seems to be accepted without question. Prices are expected to rise by 5% this year. “The NAR said it, it must be true”.

Here is the link:

6/27/2006 02:53:00 PM  
Blogger chicagofinance said...

You know my verbal Joisey salute to Bobby Boy.

6/27/2006 03:09:00 PM  
Blogger econLearner said...

One thing to observe is that in the last 3-4 months the financial media/govt/NAR etc are focussing only on the good #s in the housing reports. The headline #s are rosy, eg in todays report, the media says that Housing went down by only 1.2%. Yes it did, relative to April 06, but its down 5.5% from May 05!! The reasons for this "Headline Rosy Forecast" are different for diff parties. The NAR wants to keep selling the housing is good story to potential buyers in fear of the bottom falling out.
The govt on the other hand wants to sell this good story to justify the pending Rate Hikes that are due. There are several mainstream economists who feel that a ratehike to 6% may be required, just to prevent the USD from crashing. So the govt will keep selling the "high inflation but strong economy" story. It doesnt matter if the rates kill housing As we have discussed before, they have a choice to make..save housing or save the entire economy...

6/27/2006 03:44:00 PM  

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