Inland Empire Housing Market (Gulp!)

Mortgage insurers PMI have their latest home-price risk study out and guess who’s near the top? PMI economist juggle price momentum, affordability, regional econmic and mortgage-payment problems to come up with their index, that translates to chnace of home-price declines in the next two years in the 50 top U.S. markets. Here’s the dirty dozen, PMI’s riskiest …

1. Inland Empire: 94%
2. Vegas: 89%
3. Phoenix: 83%
4. OC: 81%
5. LA: 79%
6. Fort Lauderdale: 78%
7. Orlando: 74%
8. Sacramento: 73%
9. Tampa-St. Pete: 72%
10. West Palm Beach: 71%
11. San Diego: 69%
12. Oakland: 65%

PMI says: “Are we nearing the end of the current housing downturn? We don’t think so, given the magnitude of the run up in housing (with no significant housing downturn since the recession of 1991–92). That doesn’t mean that the level of housing activity has to fall to 1992 levels—after all there are almost 22 million more households today than there were back then, with higher income levels and lower unemployment rates. But the unsustainable surge of 2002–05 has to be worked off, and that’s what’s going on in the housing market today. The famous economist Herb Stein once noted, ‘If something cannot go on forever, it will stop.’ That is probably the best way to view the housing market today. We know that given the combination of demographics, job and income growth, and the level of interest rates, housing demand can’t fall without bounds.”