Orange County's housing market is among the riskiest in the nation, according to a new study from Walnut Creek-based PMI Group.
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The second-quarter U.S. Market Risk Index, which basis its statistics on fourth-quarter data, shows that there's a 99.8 percent chance that home prices will decline in the Santa Ana-Anaheim-Irvine metropolitan area over the next two years. However, the number is down slightly from the third quarter, when the index showed a 99.9 percent chance of decline.
A risk score of 100 means there is a "100 percent chance" that home prices will be lower two years from the date of the data, according to the report.
But, the report does show that more buyers can afford to purchase a home in Orange County. The region's affordability index increased to 102.2 in the fourth quarter, up from 97.7 in the third quarter.
An index rating above 100 indicates that home prices have become more affordable, according to the report. This index is "generally inversely related" to the risk index, which means that as affordability increases, the chance of lower prices decreases.
Orange County was also listed among the 10 least improved of the nation's 50 largest metropolitan areas. The Los Angeles-Long Beach-Glendale and Riverside-San Bernardino-Ontario areas also made the list. Among those who showed the largest improvement: Columbus, Ohio; San Antonio, Texas; and Charlotte, N.C.
Nationwide, 93 percent of the 384 metropolitan areas showed improvements in their risk scores, and 98 percent of the regions showed higher affordability. The upticks point to continued recovery in the housing market, according to the report.
Factors positively influencing the risk index include increased affordability; improving mortgage credit quality; decreases in the amount of foreclosures; and a decline in excess housing inventory.
"Housing affordability continued to climb, and in some MSAs is at or near record levels," says David Berson, PMI chief economist and strategist. "House prices have dropped sharply relative to incomes in most areas suggesting that prices have fully, or more than fully, adjusted for their unsustainable increases during the housing boom."
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