O.C. housing risk 9th highest in U.S.

For the second quarter in a row, Orange County’s risk of a price decline within a two-year period ranked ninth in the nation — just behind eight other metro areas that were tied for first, according to economists at mortgage insurer PMI Group.

The latest housing risk assessment from PMI, based largely on first quarter stats, shows …

• Orange County home prices have 99.7% chance of price loss in two years, or by the winter of 2012. PMI Group doesn’t say how big of a price drop that would be, so the declines could be small or large.
• That’s a slight improvement over the previous two quarters. In the final quarter of 2009, the probability was 99.8%. Before that, Orange County was tied for “riskiest” status at 99.9% with eight other metro areas: Miami-Dade County, Las Vegas, Fort Lauderdale, the Inland Empire, Tampa, Orlando, Jacksonville and Los Angeles County.
• Nationwide, the average risk for price drops was 51.9% — down from 53.8% the previous quarter.
• Orange County’s affordability index ran 2% above its 1995 benchmark level vs. 0.6% above it in Q4 2009.
• Despite that improvement, O.C. ranked as the “worst performing” metro area in terms of affordability among the nation’s 384 metro areas. The county was 28% less affordable than the nation’s 50 most populated metro areas.

PMI concluded:

“Across all of the nation’s MSA’s, 51.6 percent (198) ranked in the elevated and high risk (of price decline) categories, while 48.4 percent (186) had a minimal-to-moderate risk of lower prices in two years. The MSA’s in the elevated and high risk categories typically had higher unemployment rates, higher new foreclosure rates, lower affordability, a larger excess housing supply, and more volatile house prices than the MSA’s in minimal-to-moderate risk categories.”