PMI Risk Index Continues to Imply Relatively Low Chance of Home Price Declines; Southern California Ranks as Area at Lowest Risk of Home Price Declines

Business Wire, August 26, 2003

Business Editors

WALNUT CREEK, Calif--(BUSINESS WIRE)--Aug. 26, 2003

Despite a sluggish economy and continued geopolitical uncertainty, the likelihood of a decline in home prices over the next two years remains relatively low according to the PMI Risk Index released by PMI Mortgage Insurance Co. (PMI).

As of June 2003, the average PMI Risk Index value of the 50 largest metropolitan statistical areas (MSA) is 155, implying the group of 50 MSAs has on average a 15.5% probability of experiencing a home price decline within the next two years.

PMI analysts reported that the strong house price growth in past years is the consequence of rising incomes, low mortgage rates and a growing population. PMI analysts cautioned that while they continue to believe the likelihood of widespread home price declines is fairly low, they think the robust home price appreciation rates of the past will moderate and outright home price declines could occur in a number of MSAs.

PMI uses the PMI Risk Index in part to assess and manage risk levels in its own mortgage insurance portfolio.

According to PMI analysts, 'high-tech' centers such as the San Francisco Bay Area, parts of the Northwest as well as parts of Texas and Colorado are high on the list of the 50 MSAs rank-ordered by PMI and remain vulnerable to home price declines as a result of high local unemployment rates and shrinking employment bases.

In striking contrast, Southern California was identified by PMI as the area with the lowest risk of home price declines among the 50 MSAs. Strong home price appreciation and acceleration, a fairly stable unemployment rate and continued defense spending remain sources of stability for Southern California in the near future.

                         PMI Risk Index by MSA

                               Risk                              Risk
MSA                           Index   MSA                       Index
------------------------------------  --------------------------------
San Jose, CA                    395   St. Louis, MO-IL            126
Portland-Vancouver, OR-WA       350   San Antonio, TX             120
Dallas, TX                      313   Orlando, FL                 119
Denver, CO                      302   Cincinnati, OH-KY-IN        117
Detroit, MI                     287   Pittsburgh, PA              109
Greensboro-Winston Salem-High
 Point, NC                      281   Newark, NJ                   97
Seattle-Bellevue-Everett, WA    256   Nashville, TN                95
Charlotte-Gastonia-Rock Hill,         Tampa-St Petersburg-
 NC-SC                          251    Clearwater, FL              94
Austin-San Marcos, TX           242   Philadelphia, PA-NJ          91
Raleigh-Durham-Chapel Hill, NC  242   Las Vegas, NV-AZ             89
Milwaukee-Waukesha, WI          212   Bergen-Passaic, NJ           86
Kansas City, MO-KS              209   Fort Lauderdale, FL          83
Indianapolis, IN                205   Miami, FL                    80
San Francisco, CA               204   New York, NY                 79
Fort Worth-Arlington, TX        198   Washington, DC-MD-VA-WV      77
Columbus, OH                    195   Orange County, CA            77
                                      Norfolk-Virginia Bch-
Chicago, IL                     176    Newport News, VA-NC         73
                                      Providence-Fall River-
Cleveland-Lorain-Elyria, OH     173    Warwick, RI-MA              72
Boston, MA-NH                   171   New Orleans, LA              72
Phoenix-Mesa, AZ                168   Sacramento, CA               68
Salt Lake City-Ogden, UT        162   Nassau-Suffolk, NY           66
Houston, TX                     161   Baltimore, MD                66
Oakland, CA                     158   San Diego, CA                66
       National average         155   Los Angeles-Long Beach, CA   65
                                      Riverside-San Bernardino,
Minneapolis-St. Paul, MN-WI     152    CA                          58
Atlanta, GA                     130

The PMI Risk Index

The PMI Risk Index is a statistical model based on certain measures of economic activity and conditions that PMI believes is predictive of the likelihood of home price declines exceeding 10% over the next two years. Factors used to derive the PMI Risk Index include, but are not limited to, the House Price Index from the Office of Federal Housing Enterprise Oversight and labor market statistics from the Bureau of Labor Statistics.

The PMI Risk Index scale ranges from one to 1,000, where a higher score indicates a higher likelihood of future home price declines. For example, a PMI Risk Index of 100 indicates a 10% chance of a decline in home prices over the next two years.

Because the PMI Risk Index scale is linear, if the PMI Risk Index for an MSA were to increase by 100%, say to 200 from 100, then, according to the PMI Risk Index model, the risk of home price decline has also doubled. Alternatively, if the score were to decline by 50%, for example to 50 from 100, the risk of home price decline has also declined by 50%.