PMI sees California weakening

Mortgage insurer PMI Group’s latest report on the risk of falling home prices concludes there are “two distinctly different paths” right now: Most of the nation’s housing markets are showing signs of improvement, but bubble-inflated markets in California and Florida are showing signs of further deterioration amid rising foreclosures.

In 35 of the 50 largest metropolitan areas in the U.S., PMI reports, the risk of future price declines decreased in the first quarter; however, in California, the risk of price declines increased.

The main shadow over the state’s real estate markets, according to PMI, is foreclosures, which tend to drive down prices. PMI did find one sign indicating that California’s market might be normalizing: Excess housing supply is declining in many markets -- the supply of unsold inventory in Orange County, for example, dropped from 29.0 months’ worth in late 2007 to 20.3 months in early 2008.

To calculate a “risk index,” PMI uses such factors as home-price appreciation, employment, affordability, inventory, and foreclosures.

Here’s PMI’s list of cities with the highest “risk factors” in the first quarter of 2008. (A risk factor of 85% means PMI believes there’s an 85% chance of declining values in the next 24 months.)

1) Riverside-San Bernardino-Ontario: 95.5%

2) Fort Lauderdale-Pomano Beach: 92.2%

3) W. Palm Beach-Boca Raton: 91.9%

4) Orlando-Kissimmee: 91.1%

5) Las Vegas: 88.1%

6) Tampa-St. Petersburg: 86.6%

7) Santa Ana-Anaheim-Irvine: 85.8%

8) Los Angeles-Long Beach-Glendale: 85.7%

9) Miami-Miami Beach: 84.8%

10) Sacramento: 82.2%

-- Peter Viles