Fearless Money

The PMI Group has released its Q4 2005 report on the housing market, with some interesting statistics.

First, despite all the talk of housing bubbles, the risk doesn’t seem that severe for most of the country. This is along the lines of what Greenspan was trying to say when he talked about there being froth rather than one big bubble. Some areas are going to pop, almost certainly. And since those areas are ones where a lot of media and internet folks live, it will be covered in excruciating detail.

For instance, PMI rates San Francisco as 50.7% likely to experience a decline in prices. Ouch. That will hurt a lot of people, throwing some over-leveraged people out into the street. Now would not be the time to be “flipping” properties in SF or San Diego.

Some areas are still growing

However, despite the fact that Portland Oregon has seen property prices go up more than 30% in the last two years, we are only rated at 10.2% likely to experience a correction. Seattle, 10.3%. I think that is partially due to simple numbers. We’re getting more expensive here, that’s for certain, but we still have homes that a middle-class person could conceivably purchase. Perhaps that is why Portland is still seeing sales accelerate (by 5.87%).

In my view, it is when places get so ridiculously over-valued that only speculators and bank presidents can afford to own there, that the area is ripe for a fall. I’m looking at you San Diego, Boston and Las Vegas.

The top 7 areas most likely to decrease in price:

• San Diego
• Santa Anna
• Boston
• Nassau
• Oakland
• Sacramento
• Riverside

The bottom 7 of the top fifty markets:

• San Antonio
• Nasheville
• Cincinnati
• Indianapolis
• Memphis
• Pittsburgh

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