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Good news for homeowners, not so good news for home buyers.

PMI Mortgage Insurance Co., a subsidiary of The PMI Group, Inc., has released its winter 2005 Risk Index indicating a decrease in the probability of an overall house price decline since the autumn of 2004. PMI's Risk Index represents PMI's view on geographic house-price risk and the probability of a regional home-price decline as measured over the next two years.

Based on PMI's Risk Index model, as of January 2005, the average risk value of the 50 largest Metropolitan Statistical Areas (MSAs) is 161. This implies that on average, there exists a 16.1 percent probability of an overall house price decline, as measured within the next two years and across the 50 largest housing markets.

The winter 2005 average risk value decreased sequentially, quarter-over-quarter, by 13.4 percent. As of autumn 2004, PMI Risk Index data showed that the average risk value of the 50 largest MSAs was 186, which implied an 18.6 percent probability of an overall house price decline, measured within the next two years and across the 50 largest housing markets.

Analysts at PMI have attributed the average decrease to improving nationwide economic conditions indicated by generally lower regional unemployment rates and increasing (or less negative) job creation. Eight of the nine MSAs ranked at the top of PMI's Risk Index, but did experience a substantial increase in risk. For these markets, another quarter of record home price appreciation has further dented home affordability even at mortgage rates close to historic lows. As affordability for these MSAs drifts lower, this signals a further misalignment of home prices with long-term economic fundamentals causing the probability of a two-year price decline to escalate.