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Where Will Home Prices Be in 2012?

This week we have discussed how difficult it is to establish the value of a home in today’s market, what factors will impact prices in 2010, the effect distressed properties will have on values, and the challenges faced by appraisers in establishing value. Today, I want to tackle future values… specifically where prices will be in 2012.

There is no lack of prognosticators when it comes to future housing values. I believe that a group’s commitment to accuracy is determined by the amount of ‘skin they have in the game.’ There is no group with more at risk than PMI. They define their mission as follows:

PMI’s insurance products support the mortgage finance system by providing protection to lenders and investors in the event of borrower default. By protecting mortgage lenders and investors from credit losses, PMI helps to ensure mortgages are available to qualified homebuyers. When a qualified borrower cannot make a 20 percent down payment on a home, lenders will often permit a smaller down payment and purchase mortgage insurance.

They insure lenders in the case of defaulting mortgages. That is a very risky endeavor in this housing environment.  And pricing is a major component to that risk. PMI looks ahead to determine the future risk they will be taking in insuring current mortgage money.

PMI assesses the risk that home prices will decrease in the next two years. Their last report was very optimistic. They feel very strongly that prices will not be lower in the majority of regions in 2012. They report:

Overall risk (of prices being less than they are today) in the nation’s 384 MSAs decreased dramatically during the fourth quarter of 2009, with 356 showing lower Risk Scores than in the third quarter. Declining foreclosures started coupled with increasing affordability in many states were the primary causes of falling Risk Scores in the majority of MSAs.

What are the percentages 2012 Prices will be lower in your region?

Check out the map below:

What does this mean to you?

Look at the map. If you are thinking of buying, look to see what the chances are that prices in your region will be lower in two years. If you are thinking of selling, the map might help you determine if it would be wise not to wait.


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