ReviewJournal.com - Business - LV tops list for risk for homes

PRINT THIS Popular

Jun. 20, 2007
Copyright © Las Vegas Review-Journal

LV tops list for risk for homes

Depreciation chances high, new study says

By JEREMY HERRON
THE ASSOCIATED PRESS

NEW YORK -- Some homeowners in Las Vegas, California and Florida now face more than a 60 percent chance their property will be worth less in two years, according to a new study by a mortgage insurer. But for Texans and Midwesterners, there is much less reason to worry.

The PMI U.S. Market Risk index, released Tuesday by PMI Mortgage Insurance Co., predicts a less than one in 10 chance of price depreciation in markets such as Dallas, Houston and Indianapolis. Pittsburgh is the safest, with just a 6.4 percent risk that home prices will fall.

That's in stark contrast to the once-booming regions on the coasts. The index found that 15 of the nation's 50 largest metro areas have a greater than 50 percent chance of seeing price drops.

Eleven of those markets are in California and Florida, including Los Angeles and Miami. These are areas that enjoyed some of the largest price run-ups during a five-year housing boom that ended nearly two years ago.

Most Popular Stories

Lake Las Vegas seeks Chapter 11 protection

Condo buyers struggling for closure amid credit squeeze

INSIDE GAMING: For Penn, breaking up not so hard to do

Owner of Fitz under attack

New-home sales hold steady in LV

Is any bank really safe now?

RECORD PAYDAY

MCCARRAN INTERNATIONAL AIRPORT: County approves third terminal

Starbucks to close 17 LV Valley stores

NEVADAN AT WORK: Exec helps Golden Gaming forge into future

The riskiest of all markets are Las Vegas; Phoenix; Riverside, Calif.; and West Palm Beach, Fla. -- each with a greater-than-60 percent chance of depreciation.

"What the markets with the greatest risk of decline have in common is a history of price volatility: rapidly rising rates of price appreciation above the long-term average followed by a recent sharp slowdown in the rate of appreciation," said Mark Milner, PMI's chief risk officer.

Nationwide, the average chance of a price decrease in the 50 largest markets is 34 percent, PMI said. Boston and Washington are the riskiest markets in the East, with a 50 percent chance of decline. New York City is safer, coming in at about the national average

PMI's Risk Index estimates the probability that home prices will fall within the next two years, but does not forecast the depth of any decline. Its calculations are based on first-quarter data on home-price appreciation from the Office of Federal Housing Enterprise Oversight, along with mortgage prices, labor market trends and housing demand in each market.

The company adjusted its statistical model to give more weight to recent volatility in home prices, which led in part to the increased risk scores in metro areas in the Western and Southeastern regions, PMI said.

PMI, a unit of residential mortgage insurer PMI Group, typically publishes the index quarterly but skipped the spring reading because of the revision to its model.

The forecast for price declines in many major markets in the next two years comes with the housing market already struggling with lower prices.

The median price for an existing single-family home fell 1.8 percent to $212,3000 in the first quarter, the National Association of Realtors reports. That was the third consecutive quarterly decline. Prices slid 2.6 percent in April, a record ninth consecutive monthly drop.

Home prices fall when the supply of available houses exceeds the number of buyers on the market. That has been the case for more than a year, after builders spent lavishly to develop land in response to a surge in demand for homes that was exaggerated by speculative buyers.

Companies have curtailed building recently as they try to sell existing stock. In May, new-home construction fell 2.1 percent, mainly on weakness in the South and West, the Commerce Department reported earlier Tuesday. That was the sharpest drop since a 13.9 percent slump in January.

Construction permits, an indicator of future activity, fell 1.8 percent. But Banc of America analyst Daniel Oppenheim said the drop was not enough to affect an upturn in prices.

"Lower construction is needed to work through the excess supply," he said. Until that happens, he added, builders will likely continue to cut prices to increase sales, which will hurt prices for preowned homes.

Leave Your Comment	6 Reader Comments
Terms & Conditions The following comments are provided by readers and are the sole responsiblity of the authors. The reviewjournal.com does not review comments before publication nor guarantee their accuracy. By publishing a comment here you agree to abide by the comment policy. If you see a comment that violates the policy, please notify the web editor. Some comments may not display immediately due to an automatic filter. These comments will be reviewed within 48 hours. Please do not submit a comment more than once.
Please enter your name Name: Please enter your email Email: Please enter a comment COMMENTS : (word count limit is 300) You have reached the maximum number of words allowed Current Word Count: Dana Whittaker wrote on June 29, 2007 07:52 AM: (cont'd from previous comment) separately to close on the same day so that they couldn't find out about each other. There can be a bit of a delay on your credit reports. This is loan fraud. Get Good Advice. Trust your gut instinct. Does who you're getting advice from have experience and references? Are they recommending paying your mortgage payment with a Home Equity Line of Credit? That's horrible advice! Make sure your agent and lender also own properties and practice what they preach. Ask them specifically about their experiences. Most will be happy to share their successes and lessons with you. Come from Abundance. There is always plenty to go around for everyone. And be patient. bob wrote on June 23, 2007 06:02 AM: Everyone is moving further out from the Mexican tumor. Mexicans move in and whammo, the place goes to s!@#. This market is going to crash hard. Who wants to live in the most dangerous state in the US. The police have lost control of this community.What community!! Hide those crime stats and market the s@#$ out of this s!@#hole. Let the cans have it!! Are you really as dumb as you seem? wrote on June 21, 2007 04:26 PM: Get real Nevada! The rich are getting richer because STUPID IS AS STUPID DOES!It is only good sense that you can not buy a property for a million bucks and think your mortgage payment will be $500.00 until the end of time! Someone is lying to you! Work hard, save hard and buy what you can afford! Don't plunk down your life savings on a house that requires all of your savings, a first mortgage and a second to cover the difference. Don't pay mutiple interest rates or rates that are not guarenteed. Why would you risk loosing everything? I realize that homeownership is the American dream and I believe in that but start small, realize a long term goal and stop trying to "FLIP" yourself into greatness overnight. Building wealth takes time, focus and good sense. BUY WHEN THE PRICES FALL, STAY AWHILE AND SELL WHEN THEY ARE HIGH! So what if you don't make a million on your first deal, a small profit is better than none at all! As far as the builders and mortgage companies go, I agree that they should be hog tied and beaten for their deceite, as a matter of fact let's throw in the Realtor pool that encouraged this bad behavior, they weren't crying when they were making money! Remember PAY BACK is a bitch and KARMA RULES! Bubble Believer wrote on June 20, 2007 04:39 PM: All those SOB's at GLVAR who kept up the facade of "hey the time to buy is now" where are those schmucks now...they should be taken out and tied to the nearest developers sign and stripped to their birthday suits and bullwhipped until they bleed from their a***ss and made to cry like stuck pigs! The meltdown is now frinally being acknowledged by the local press...but the worst is yet to come...a major price correction the likes you have never seen is about to hit the Valley! carlos wrote on June 20, 2007 01:57 PM: Does anyone remember when the news/media said that their weren't going to be any apartments left in the valley? 2 years ago or so, What a joke! Now that my house is worth less when do I get my property tax refund? Live as close to the strip as you can people, crime happens everywhere. alan berk wrote on June 20, 2007 05:56 AM: las vegas doesn`t need a single new home built! Price delcines in those stupid new tracts is just what these stupid people deserve! all of the congestion and traffic that places like summerlin and mountains edge cause i sure hope the value of these places declines! over inflated monstrosities! When will people get it - to live close to where they work! just think if allof the employees of the strip hotels lived in the housing that is east of the strip-u.s 95 wouldn`t be a paarking lot!!? How many of those people drive by a perfectly good house to get to work!?