Home prices appear to be bottoming out, but the market is in a transitional phase where rising delinquencies and foreclosures may have “a concentrated and contagious impact” on local markets, according to a new report by First American CoreLogic.

CoreLogic’s quarterly Core Mortgage Risk Monitor tracks the risk of loan delinquencies due to fraud and collateral risks, home prices and the health of local economies.

Thanks to continued moderation in home prices, stable economic health at the national level, and a stabilization of fraud and collateral risk, CoreLogic’s overall risk index held steady during the first quarter of 2007. The index posted a slight 6 percent increase, but remains below a baseline established in the first quarter of 2002.

CoreLogic’s foreclosure index was up 10.5 percent over the previous quarter, however, a trend that’s expected to continue throughout 2007 and into 2008 as borrowers with adjustable-rate mortgages cope with interest-rate resets.

“Not only has the overall national foreclosure index risen, but certain markets are posting dramatic increases, particularly the Upper Midwest and Ohio,” the report said.

Eight of the 10 highest-risk markets identified in the report are in Ohio and Michigan.

The five Ohio markets on the list were Youngstown, Dayton, Toledo, Cleveland and Akron. Three Michigan markets made the list, including Detroit, which CoreLogic deemed the highest risk among the largest 100 markets nationwide. Grand Rapids and Warren-Troy-Farmington Hills, near Detroit, were the other Michigan housing markets on the list. Rounding out the list, Memphis, Tenn., was identified as the second-riskiest market, and Indianapolis, Ind., the ninth.

Four of the 10 lowest-risk markets were in Florida: West Palm Beach; Ft. Lauderdale; Orlando; and Sarasota. Rounding out the list of lowest-risk markets were Phoenix, Ariz.; Salt Lake City, Utah; Richmond, Va.; Washington, D.C.; Bethesda, Md.; and Honolulu, Hawaii.

The top 10 riskiest markets exhibited lower-than-average price appreciation of 2.9 percent, compared with 5 percent among the 379 markets monitored nationwide. That estimate, in turn, represents a slight decline from the 6.8 appreciation rate CoreLogic calculated for the previous quarter.

But the pace of change in home-price appreciation has slowed, “indicating that house prices may be settling into a new, less-volatile phase of the market cycle,” the report said.

But even as home prices stabilize, “We are entering a transitional period where the risks associated with rising delinquencies and foreclosures can have a concentrated and contagious impact on local markets,” the report said.

According to another recent CoreLogic report, each 1 percent increase in the foreclosure rate increases the likelihood of fraud by 4 percent.

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