The risk of home-price declines decreased in 93 percent of the 384 markets tracked at the end of last year by analysts with PMI Mortgage Insurance Co., although half still showed an elevated or high risk of depreciation.

Overall risk of price declines "decreased dramatically" during the final three months of 2009, PMI said, largely because of improvements in affordability and declining foreclosure starts. Affordability was helped by falling home prices, lower mortgage rates, and increasing personal income.

See related article:

Top 10 most risky, least risky real estate markets

The risk of home-price declines decreased in 93 percent of the 384 markets tracked at the end of last year by analysts with PMI Mortgage Insurance Co., although half still showed an elevated or high risk of depreciation.

Overall risk of price declines "decreased dramatically" during the final three months of 2009, PMI said, largely because of improvements in affordability and declining foreclosure starts. Affordability was helped by falling home prices, lower mortgage rates, and increasing personal income.

"House prices have dropped sharply relative to incomes in most areas suggesting that prices have fully, or more than fully, adjusted for their unsustainable increases during the housing boom," PMI Chief Economist David Berson said in a statement accompanying the report.

PMI expects risk scores to continue falling, as unemployment rates should show improvement in the first quarter of 2010 and going forward, which should prove to be "an important new force in reducing the risk of lower prices."

Risky mortgage lending practices and loan products decreased sharply in 2009 "and are hardly present at all in 2010 lending," the report said.

Despite that, PMI’s Risk Index — which takes into account factors including unemployment, foreclosures and inventory levels — still showed a 90 percent or greater chance of further price declines during the next two years in every market tracked in Florida and Nevada.

Most markets in the other "sand states" hit hard during the downturn, California and Arizona, were at high risk for price declines. All but three of 28 markets tracked in California showed improvement during the fourth quarter of 2009, however.

Seven of the 10 markets with the highest risk scores were in Florida: Naples, Cape Coral, Lakeland, Palm Coast, Miami, Port St. Lucie and Fort Lauderdale. Also making the top 10 riskiest markets list were Kingman, Ariz.;  Riverside, Calif.; and Las Vegas.

Six of the 10 least risky markets were in North Dakota and Iowa: Grand Forks, Fargo and Bismark N.D.; and Iowa City, Ames and Cedar Rapids, Iowa. Also on the 10 least risky markets list were Killeen, Texas; Fayetteville N.C.; Morgantown, W.V.; and Texarkana, Ark.

***

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