Blanche Evans said this morning:
The PMI Mortgage Insurance Company, the U.S. subsidiary of The PMI Group, Inc., has updated its 2007 U.S. Market Risk Index. By ranking the 50 largest metropolitan statistical areas (MSAs) by the likelihood that home prices will be lower in two years, the average score, weighted by population, was 346 — which means there’s a 34.6 percent chance that home prices will be lower in two years than they are now.
According to yesterday’s Dallas Morning News:
"The areas that have had big run-ups in prices and have seen a significant slowdown in their appreciation rate are where the highest risks are," said PMI’s Mark Milner. "When you’ve had big run-up in prices, you tend to get affordability out of whack, and that adds risk."
At the other end of the risk scale, cities with "a history of low to moderate rates of volatility in house price appreciation have a lower risk of price declines," Mr. Milner said.
While the average risk is 34.6%, the risk varies widely according to metro area:
Cities with the highest risk for declines:
• Riverside, Calif., 65%
• Phoenix, 64%
• Las Vegas, 61%
• West Palm Beach, Fla., 60%
• Los Angeles, 58%
Cities with the lowest risk:
• Pittsburgh, 6.4%
• Fort Worth, 7.4%
• Dallas, 7.5%
• Houston, 7.9%
• Indianapolis. 8.4%
You can read the report here, along with some great graphs. [Thank you Old Mike!]
great report!
the map is closely tied to the heat map of overvaluations…. almost like twins
http://immobilienblasen.blogspot.com/2007/05/interactive-heatmap-housing-overunder.html
Jan-Martin-
It also looks remarkably like this wonky loan map. Coincidence? I think not!
yup!
Yessss.
My plans to dominate Mohave County RE are not subject to downside risk. Score!
in other news, economists say fire is hot, water is wet and men like breasts.
YAWN. i couldn’t care less what the “official” statistics say or what Jay Butler says, prices have dropped already and are dropping as we speak.
there is every reason to believe prices will continue to drop meaningfully until the economic fundamentals become far more rational than they are currently.
I think we need to see a national map by county of median home price divided by median household income…twist?
Great idea agnostic.
Havens-of-Manhattan.com
please parse that map in maricopa county, specfically north scottsdale.
conventional wisdom is that area is bulletproof, to which i say- complete balderdash. the ratio there is as out-of-whack as any in the country.
I wonder how many people will incorrectly assume that a “65% Chance of falling prices” means a 35% chance of rising prices???
That is of course wrong, because it completely leaves out the % chance of stagnant prices. And stagnant prices can be just as bad as falling prices, due to inflation, property taxes, property upkeep fees, etc.
If there is a 65% chance of falling prices, then what are the chances of falling OR stagnant prices?
Assuming *THAT* stat is 80% or more (ie: 15% chance of stagnant prices + 65% chance of falling prices), then at least 4 out of ever 5 people buying homes today are going to in fact lose out in the next two years.
If 65% chances of falling prices ain’t waking up the MSM, maybe 80% chances of falling/stagnant prices will.
Sorry, one more thought…
Perhaps best would be a combined % chance of:
(1) falling prices
(2) stagnant prices
(3) minor price gains that will be below the current rate of inflation (ie: inflation-adjusted value loss on property)
That would have to be a number over 80%, wouldn’t it?…
Get the MSM to chew on that!
The chance of falling and stagnant prices approximates the chance that the NAR will never say there is a chance that prices will fall or be stagnant. How’s that for metaphysical certainty?
Kid — Lest ye stone me in writing, I would suggest to all that there are some places in the country that ARE more bulletproof than others, north ‘dale being one, simply because incomes don’t matter as much as bank accounts there. Until MLB and NFL salaries, PGA purses, and the prices of weed/X/meth on college campuses drop, values at Whisper Rock or other developments of that ilk are not going down much. Likewise for Beverly Hills, La Jolla, Point Loma, etc. The chicks still will pay for upgraded bojobs and botox, ergo, the doctors will pay an un-market price for RE in the most desirable neighborhoods. So…if north ‘dale prices are off the charts, its because the common man doesn’t live there. Which is not to say they can’t go down, but I think it’s more likely that, say, $700k TW Lewis homes in Estrella will decline than the $4MM Whisper Rock custom places will.
That to me is why a price/income map is crucial, particularly in terms of the incomes.
And when I say particularly in terms of the incomes, of course I mean for the places where people actually work for a living.
If we’re doing community or zip code maps, i’d also like to see a map of conventional vs. wonky financing (i.e. percent conventional vs. all or something like that, and not just by state. The guys that did the country map got their figures somewhere.
Disclaimer: I don’t live in north ‘dale.
If you read the tucson REALTORS blogs they are all screaming “stability”… like the kid says: Balderdash!
Everyone that I know who is selling a home is worried. They are worried that no one is coming to look, let alone make an offer. We have a guy on the job here that has had his “median” priced home on the market for over a year…
When a reliable third party starts compiling and analyzing the data… I’ll start to pay attention to it. Until then I don’t trust anything the NAR or Gobberment has to say about “statistics”. If they reported the truth we would have a totally different outlook on the market because the prices would have already fell by more than 65%.
Check these blogs out and be sure to comment in a nice way:
http://barbaralasky.com/tucson-real-estate-blog/
http://www.tucsonrealestateblogs.com/
Agnostic-
You obviously haven’t seen my cartographic skills- I can draw a map that will get you from my house to the market though! : )
Agnostic-
About bullet-proof Scottsdale….
L graciously looked up the Scottsdale numbers for me:
There are 1351 properties listed in Scottsdale for over $1M. 482 have sold since 1/01/07- around 81/month. So there is probably around a 16 month supply- way worse than the Valley average of almost 10 months.
I’m a big believer in old-fashioned supply and demand- there aren’t enough millionaires to buy all these properties. Prices are going to come down.
And for those who suffer from Scottsdale hate/envy, L also sent me a blog I hadn’t seen before.
Thanks L!
Lower prices> A area in North Scottsdale where houses (6) were listed for a avg of 1.1 million were on the market for about 10 months as soon as a avg price reduction of 10% to 15% was advertise i notice three of these homes sold in the last 30 days. No question buyers are out there, they don’t want to committ they want to see a true price reduction in the MLS or new home buiders price sheets and then they pounce on it.
Btw, a quick check shows the houses reduced still produce a avg of 80k profit for the sellers.
There’s no denying that prices will come down, but I’m not backtracking, either. My point, whether on topic or not, is that the pain felt north of Shea Boulevard and east of Scottsdale Road on a value reduction is a lot less than the pain felt elsewhere in the Valley, or, say, in Temecula ;P
With regard to Twist’s cartography skills, somebody should get Landiscor or whoever (I don’t think Zillow or the Repugnant would take the job) to do a Valley misery index (i.e. assessed value - which I admit is not expected to be in the ballpark of liquidation value - divided by median income by zipcode), and, perhaps with some kind of wonky finance overlay, SEE where the most pain is.
Just a thought.