An index that charts the risk of home-price declines across the United States is giving Silicon Valley a slightly improved forecast.

The odds Silicon Valley homes will fall in price over the next two years have dropped slightly to 43.3 percent from previous estimates, though the drop isn’t big enough to get very excited about.

It remains quite a bit higher than the national average of 32.9 percent for the 50 regions studied by PMI Mortgage Insurance, though less than the risk in swaths of Southern California and the Central Valley.

PMI, a Walnut Creek mortgage insurance company, publishes a quarterly analysis of risk factors affecting home values based on federal data that track economic conditions, income, interest rates and affordability.

The valley’s new risk number is down slightly from 49.1 percent in the first quarter of 2007 and 51.3 percent in July 2005. The change isn’t statistically significant, but hints at a healthy trend in the area’s housing market.

There are some imponderables. The study is based on second-quarter data, and doesn’t incorporate recent rapid changes in mortgage rates, the Federal Reserve’s rate drop, declines in home sales and an increase in the number of homes for sale in some areas.

However, employment is significantly better here than in Southern California, where the PMI risk index has Riverside, Santa Ana and Los Angeles among the top 10 riskiest areas in the United States. Other areas at high risk for a price decline include Las Vegas, Phoenix and the area from Oakland to Hayward.

San Francisco and the Peninsula scored slightly better than San Jose, with only a 40.5 percent chance of a decline.

Compared with the rest of California, Northern California is in a less risky position, according to Lavaughn Henry, PMI’s director of economic analysis.

Nationally, the risk of price declines dropped for the first time in 2 1/2 years, though the average risk score remains high.

Source:

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