The PMI Mortgage Insurance Co. recently released its Summer 2008 U.S. Market Risk Index. It ranks 50 cities around the country according to how likely they are to continue to see a decline in the price of housing over the next two years. You can read a summary of the report and the complete list by clicking above.
Real estate investors may find the list helpful by avoiding the markets with the highest risk of price declines and focusing on the bottom of the list, which shows the cities least likely to see home prices fall further.
As you might expect, the areas at the top of the list, with the highest risk, are all in California, Florida, Arizona, and Nevada. These are markets which experienced explosive growth during the last 10 years, with home prices showing huge appreciation, and thus have the farthest to fall.
Here are the top 12 markets and their corresponding risk percentage. NOTE - the percentage number indicates the likelihood of price declines, it has nothing to do with the amount of the decline.
| 1. Riverside - San Bernardino, CA |
|
95.5% |
| 2. Fort Lauderdale, FL |
|
92.2% |
| 3. West Palm Beach - Boca Raton, FL |
|
91.9% |
| 4. Orlando - Kissimee, FL |
|
91.1% |
| 5. Las Vegas, NV |
|
91.1% |
| 6. Tampa - St. Petersburg, FL |
|
86.6% |
| 7. Santa Ana - Anaheim - Irvine, CA |
|
85.8% |
| 8. Los Angeles - Long Beach, CA |
|
85.7% |
| 9. Miami, FL |
|
84.8% |
| 10. Sacramento - Roseville, CA |
|
82.2% |
| 11. Phoenix - Scottsdale, AZ |
|
79.6% |
| 12. San Diego, CA |
|
78.0% |
Notice that our very own Sacramento ranks as #10 most risky markets. In regards to the Davis real estate market, as I have talked about in many previous posts, Davis may be just 10 miles from Sacramento but as a real estate market it is worlds away. The dynamics of the Davis real estate market are unique and largely unaffected by Sacramento home prices.
Looking at the other side of the coin, the "safest" markets, with the least likelihood of price declines over the next two years, would be those at the bottom of the list. If you are an investor interested in getting a good rental home with little chance it will go down in value, you might find it among these cities. As you might expect, most of these cities are in the Midwest and Texas.
| 39. Austin, TX |
|
<1% |
| 40. Denver - Aurora, CO |
|
<1% |
| 41. Charlotte, NC |
|
<1% |
| 42. Kansas City, MO-KS |
|
<1% |
| 43. Columbus, OH |
|
<1% |
| 44. Cincinnati, OH |
|
<1% |
| 45. Indianapolis, IN |
|
<1% |
| 46. San Antonio, TX |
<1% |
| 47. Houston, TX |
|
<1% |
| 48. Pittsburg, PA |
|
<1% |
| 49. Dallas, TX |
|
<1% |
| 50. Fort Worth, TX |
|
<1% |
Everyone is trying to do the impossible, that is, "time" the weakness in home prices so as to buy at the exact bottom of the market. It's a difficult if not impossible task. Perhaps the real estate investor should focus on opportunities in the less risky markets until things become more steady.
Are you a real estate investor? What markets are looking like good buys to you right now?
