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Source: Reuters
Date: 10/2/2008
Authors: Syantani Chatterjee

News Bite

California and Florida homes top risks for price drops

California and Florida cities top the list of those under the risk of future plummeting home prices in the next two years, a report said Wednesday. According to the PMI Fall 2008 U.S. Market Risk IndexSM, 17 of the top 50 metropolitan housing markets ranked in the highest-risk category were in California, Florida, Nevada and Arizona. Increases in foreclosure and unemployment rates have intensified the risk of home prices dwindling further, economists at PMI said.

The index, published by a subsidiary of the PMI Group, Inc., ranks the nation's largest metropolitan areas according to the likelihood that home prices will fall in the next two years. The risk of future price declines shot up by at least 10 percent in these 16 metropolitan areas from the previous quarter.

The index predicted the highest risk of future price declines in California's Riverside-San Bernardino-Ontario, (99.5 percent) and Florida's Fort Lauderdale-Pompano Beach-Deerfield Beach (99.5 percent). The sharpest increases in risk from previous quarters were seen in California's San Francisco-San Mateo-Redwood City (71.6 percent) and San Jose-Sunnyvale-Santa Clara (87.1 percent).

The index looks at several factors that could affect house prices, including the past history and the current trend of prices, rates of foreclosures and unemployment. The homes prices, unemployment rates and income levels determine affordability of an average household. The report did not see any an improvement in the affordability for a family with an average income.

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