Discussion of price and valuation risk in single family markets these days will produce a host of opinions and approaches.  Reading and listening to the varying pundits and experts makes our head spin some days.  Clearly no one has a crystal ball that has proven dominantly accurate. 

One of the tools that we think has an established track record in looking at risk of further price reduction is the Market Risk Index published by the PMI group.  Here’s how they describe their index –

The U.S. Market Risk Index is based on the results of applying a statistical model to data on local economic conditions, income, and interest rates, as well as judgmental adjustments in order to reflect information that goes beyond the Risk Index’s quantitative scope. For each Metropolitan Statistical Area (MSA) or Metropolitan Statistical Area Division (MSAD), the statistical model estimates the probability that an index of metropolitan area-wide home prices will be lower in two years, with an index value of 100 implying a 100% probability that house prices will be lower in two years.

Here are the markets in our database with the highest PMI Group Market Risk Index values as of today –

1. Naples, FL (96.2)
2. El Centro, CA (96)
3. Cape Coral – Ft. Myers, FL (94.2)
4. Palm Coast, FL (93.8)
5. Riverside, CA (93.2)

Tomorrow we’ll start a two day look at the Multifamily Jobs Subscore data from our in house Market Fundamental Scores. 

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