PMI: US Home Prices Likely Lower In 2 Years

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Falling home prices any be moderating, but they are not likely to be heading higher anytime soon. That’s according to mortgage insurer PMI Group ((PMI).One of the the largest mortgage insurers in the US, PMI is forecasting that home prices will be lower in 2011 than they are today, including 30 of the 50 largest metro areas.  The decline is likely to spread to “all regions of the nation” from California, Florida, Nevada and Arizona, the states most affected by the housing slump.This line really grabbed me: “The 15 areas with the highest probability of lower prices in 2011 each have a 99 percent chance.”

Newswire:

“The report said as many as 85% of the country’s 381 metropolitan areas are facing an increased risk of lower home prices in 2011, with Florida, California and Nevada continuing to be at the highest risk.

Among the country’s 50 most populated metro areas, the PMI study showed 28 to be in the highest risk category, signaling the greatest probability for lower house prices by the first quarter of 2011.

The credit crisis was set off after the housing bubble deflated and popped – and that crisis only reinforced an extremely difficult dynamic in the housing market.”

The charts below are not at all encouraging:

US Home Prices, 1890-2009

click for larger charts csnominal0706091-300x226.gif

Real Home Prices, 1890-2009

csreal070609-300x226.gif

Year-Over-Year Change Home Prices, 2001-2009

cstwenty0706091-300x226.gif

Sources: U.S. Home Prices to Fall Through 2011’s First Quarter Dan Levy Bloomberg, July 7 2009 http://www.bloomberg.com/apps/news?pid=20601103&sid=aEwbzPfaEGw8

PMI Risk Index Shows US Home Prices Likely Lower In 2 Years Kerry Grace Benn, Dow Jones Newswires, JULY 7, 2009 http://online.wsj.com/article/BT-CO-20090707-708983.html

Originally published at The Big Picture and reproduced here with the author’s permission.

Barry Ritholtz

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3 Responses to "PMI: US Home Prices Likely Lower In 2 Years"

  1. Guest   July 8, 2009 at 2:04 pm

    Are we not going to discuss the fact that PMI Group has a vested interest in forecasting lower future home prices?My BS-meter sounds loudly at 99% probability forecasts.

    • Guest   July 9, 2009 at 1:18 pm

      Please explain. I thought that insuring the mortgage is different than insuring the house itself. Why would PMI have a vested interest in the value of the home being lower? How would a lower home value increase the premiums for mortgage insurance?

  2. Gordon Cannoles, CPA   July 12, 2009 at 8:53 am

    Could not agree more with PMI Group. The Median wage continues to be flat and mortgage lending standards are starting to come back. Add higher interest rates and there will really be blood in the water. Foreclosures in the Dallas/Fort Worth area are selling at 30%+ below current property tax appraisals. The D/FW area did not even have the hugh run up in prices like other areas. A residential dwelling is only worth the mortgage amount a buyer can qualify for.