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Central Valley home price plunge leveling off
WALNUT CREEK April 10, 2008 7:18am 
• Risk of further drops lessens in some areas • But region is still one of the riskiest in U.S. 
PMI maps the risks of price declines.
The risk of further home price declines is beginning to mitigate in some areas of the country, including parts of the Central Valley, while it continues to increase in others, according to a report Thursday from PMI Mortgage Insurance Co., the Walnut Creek-based U.S. subsidiary of PMI Group Inc. (NYSE: PMI).
Risk continues to increase in states where price growth dramatically exceeded historical norms and is starting to decline in areas where prices grew at a sustainable rate, PMI says.
Thirteen of the nation's Top 50 metropolitan areas are in PMI's highest risk rank, with a greater than 60 percent chance that home prices will be lower in two years. Risk remains largely concentrated in a number of MSAs in California and Florida, as well as in Las Vegas, Nev., and Phoenix, Ariz.
Risk scores translate directly into an estimated percentage risk that home prices will be lower in two years.
The MSAs with the highest risk scores are in Southern California the Riverside/San Bernardino/Ontario metro area (93 percent), along with Las Vegas (91 percent), and Orlando (85 percent), says PMI.
Within the Central Valley, where the subprime mortgage meltdown has been especially widespread, Stockton and Sacramento are still forecast to have a growing risk of lower home prices, PMI says. Chicos risk, lowest in the Valley, is also up.
But the Valleys other metro areas have lower although still high risks of further drops in home prices in two years. The PMI risk scores, based on fourth-quarter Office of Federal Housing Enterprise Oversight (OFHEO) data, with Q3 numbers in parentheses:
Bakersfield, 79.1 (85.5)
Visalia-Porterville, 52.2 (61.9)
Hanford-Corcoran, 34.7 (43.0)
Fresno, 54.1 (59.2)
Madera, 60.5 (64.4)
Merced, 87.4 (91.5)
Modesto, 85.4 (85.6)
Stockton, 92.0 (91.0)
Sacramento, 77.7 (72.5)
Chico, 47.7 (39.9)
"Excess supply is responsible for much of the risk we're seeing in the market," says David Berson, chief economist and strategist for the PMI Group. "The excess supply of housing in the United States is 9.2 months for existing homes (the 20-year average has been six) and 9.8 months for new homes (the 20-year average has been 5.5), which will continue to depress prices.
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