The risk of home price reductions across the U.S. has been triggered by the year-over-year slowdown in the appreciation rate of home prices and a decrease in housing affordability, according to the PMI Mortgage Insurance Co. The forecasts are based on PMI's Winter 2007 Market Risk Index report that lists out the communities which face the risk of home price decrease in the forthcoming years. Several communities are at risk of home price reductions but in areas that have strong economic fundamentals such as low unemployment rates, good job growth and incomes, the risk of home price declines is much lower.



Out of 50 largest metropolitan statistical areas (MSAs), 34 have shown an increase risk of home price declines. The PMI U.S. Market Risk Index (SM) average score increased consequently from 328 to 342, raising the risk of home price decline in the next 2 years to 34.2 %. The year-over-year appreciation rate has slowed down in 43 of the 50 largest MSAs.

The risk of home price decline went up to 50 % from 18 % of last quarter in 19 MSAs with California and the Eastern Seaboard facing the most risk. Eight of these MSAs are located in California, eight in the Northeast and two in Florida.

However, most MSAs are going strong on the economic front in terms of unemployment rates and job growth with 46 out of the 50 MSAs recording employment growth. New Orleans topped the list of MSAs registering a positive job growth of 8.37 %. Only Detroit and Warren in Michigan, Cleveland in Ohio and Indianapolis in Indiana saw a slump in the job growth rate.

The top 20 communities at risk for home price reductions and their risk scores are as follows:

1.Sacramento-Arden-Arcade-Roseville, CA - 604

2.San Diego-Carlsbad-San Marcos, CA - 603

3.Oakland-Fremont-Hayward, CA - 603

4.Santa Ana-Anaheim-Irvine, CA - 602

5.Nassau-Suffolk, NY - 601

6.Riverside-San Bernardino-Ontario, CA - 600

7.Los Angeles-Long Beach-Glendale, CA - 597

8.Boston-Quincy, MA - 595

9.Providence-New Bedford-Fall River, RI-MA - 595

10.San Jose-Sunnyvale-Santa Clara, CA - 592

11.San Francisco-San Mateo-Redwood City, CA - 588

12.Edison, NJ - 586

13.Fort Lauderdale-Pompano Beach-Deerfield Beach, FL - 579

14.Washington-Arlington-Alexandria, DC-VA-MD-WV - 568

15.New York-White Plains- Wayne, NY-NJ - 566

16.Cambridge-Newton- Framingham, MA - 563

17.Las Vegas-Paradise, NV - 550

18.Newark-Union, NJ-PA - 549

19.Miami-Miami Beach- Kendall, FL - 535

20.Baltimore-Towson, MD - 498

If you are considering buying a home, condo or any other type of real estate, be sure to seek out the services of a local real estate agent to advise you about real-time local market conditions.