Increasing unemployment and foreclosure rates kept home prices down without relieving pressure on balooning inventories, boosting the risk of price declines in all but a dozen of the nation’s 381 metro areas within the next two years, mortgage insurer PMI Mortgage Insurance Co. said.

Increasing unemployment and foreclosure rates kept home prices down without relieving pressure on ballooning inventories, boosting the risk of price declines in all but a dozen of the nation’s 381 metro areas within the next two years, mortgage insurer PMI Mortgage Insurance Co. said.

PMI’s analysis of statistics compiled through the end of September showed high-risk metro areas remain concentrated in Florida, California, Arizona and Nevada. But a number of metropolitan statistical areas (MSAs) in the Rust Belt and East Coast saw "marked increases" in the chance of lower house prices within two years.

"With the recession continuing, higher unemployment rates and rising foreclosure rates will put additional upward pressure on risk," the report concluded. Those factors will be offset to some extent by continuing improvements in housing affordability, the report said, but on balance, "it is likely that the risk index will rise further in many MSAs in coming quarters."

Across all 381 MSAs, 26 percent ranked in the "elevated" (50-70 percent chance of price declines in two years) or "high risk" (70 percent or better) categories. However, PMI sees "minimal risk" — a 10 percent or less chance of price declines within two years — or low risk (a 10 to 30 percent chance) in 66 percent of MSAs.

PMI said 16 of the nation’s 50 largest MSAs — including 11 in California and Florida — have a 70 percent or greater chance of price declines within two years, PMI estimated, placing them in the highest-risk category. The 16 MSAs were Riverside, Calif.; Miami; Fort Lauderdale, Fla.; Los Angeles; West Palm Beach, Fla.; Las Vegas; Tampa, Fla.; Orlando, Fla.; Santa Ana, Calif.; Jacksonville, Fla.; Phoenix, Ariz.; San Diego; Providence, R.I.; Sacramento, Calif.; Edison, N.J.; and Detroit, Mich.

The chance of national home-price declines in two years rose from 21.9 percent to 28.9 percent between the second and third quarters, PMI said.

At the end of the third quarter, 67 percent of MSAs saw home prices fall during the previous 12 months, nearly twice as many as the same quarter in 2007. Prices were weakest in California (-24.9 percent), Nevada (-18.6 percent), Florida (-16.6 percent), and Arizona (-13.6 percent).

PMI has previously relied on data from the Federal Housing Finance Agency, which includes refinancings and excludes mortgages not eligible for purchase or guarantee by Fannie Mae and Freddie Mac.

This month’s study relied on a repeat transaction home-price index from First American CoreLogic’s Loan Performance division, which it said better reflects the market’s breadth and eliminates bias from the inclusion of refinancings.

Another change to PMI’s forecasting model was a move from state-based measures of mortgage foreclosures to metro-area-based measures, to more accurately capture the impact foreclosures have on prices at the local level.

Data aggregator RealtyTrac today released a report on 2008 foreclosure-related filings, estimating that 2.3 million properties were subjected to foreclosure-related filings last year, up 81 percent from 2007 (see story).

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