Home prices likely to fall, PMI says: "
Posted on Wed, Jan. 18, 2006
Home prices likely to fall, PMI says
By James Temple
CONTRA COSTA TIMES
The likelihood of a housing price decline in the East Bay ticked up during the fourth quarter, according to a mortgage insurer's closely watched analysis.
Walnut Creek-based PMI Group Inc.'s latest U.S. Market Risk Index put the chance of a price drop over the next two years in Alameda and Contra Costa counties at 55.8 percent, up from 50.2 percent last quarter. That makes it the fifth-riskiest market among the nation's 50 largest, as it was in the third quarter.
The two main factors worsening the odds for homeowners are the continuing declining affordability rates in the East Bay -- it now takes 27.7 percent more income to swing a median monthly payment than it did in 1995, after adjusting for inflation -- and the fact that prices have flattened, which could be the prelude to a fall.
'Appreciation rates have been so high that it's just not sustainable,' said Mark Milner, PMI's chief risk officer. 'When housing rises faster than incomes, we would expect housing prices to slow down.'
He emphasized, however, that local prices will not necessarily fall. Indeed, the index allows a 44.2 percent chance that they will not. But Milner, whose company insures home mortgages, said buyers should exercise prudence, most notably by thinking twice about riskier instruments such as interest-only or negative amortization loans.
Other organizations are mixed on the direction state housing prices are headed. The California Association of Realtors is forecasting a 2 percent dip in sales volume this year, but it expects prices to rise"
Wednesday, January 18, 2006
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