Home price danger zones

Chris Palmeri

PMI Group, one of the nation's largest insurers of home mortgages, says there are five areas of the country with a risk of price declines over 50%. All are in the Northeast or California. Boston continues to lead the list with a 55% chance of price declines. San Diego, with a 53.6% chance, has jumped over Long Island with 53.2%. Pittsburgh is last at 5.4%. PMI has also introduced a valuation index that shows where home prices are estimated to be overvalued. Los Angeles leads the list with an overvaluation of 33.7%. Next comes Sacramento, at 31.3%, and Riverside, Calif. with 30.7%.
"House prices are sticky, so moving to another phase in the real estate cycle can be a slow process," explains Mark Milner, chief risk officer with PMI Mortgage Insurance Co. "We believe that over the medium to long term, prices will move into better alignment with local economic factors, in particular income."
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