PMI Mortgage Insurance Co. Spring Risk Index Reveals California and th

    Business Editors/Real Estate Writers

    WALNUT CREEK, Calif.--(BUSINESS WIRE)--April 27, 2005--The Northeast and California again top the PMI Risk Index, released today by PMI Mortgage Insurance Co., a subsidiary of The PMI Group, Inc. (NYSE:PMI). The Risk Index, produced quarterly, represents PMI's view on geographic house-price risk and the probability of a regional decline in home prices in the nation's 50 largest metropolitan statistical areas (MSAs) and metropolitan statistical area divisions (MSADs) over the next two years. Fourteen of the top fifteen riskiest MSAs are in either the Northeast region or California, the spring 2005 Risk Index indicated.
    "The latest PMI Risk Index numbers reveal that most of the increase in house-price risk is concentrated in certain markets, caused by regional weakening in affordability. Local house price appreciation, in many cases in the double digits, has outpaced local income growth," said Mark Milner, Chief Risk Officer with the PMI Mortgage Insurance Co. The Index reveals increasing stratification, with risk increasing in the highest risk areas and decreasing in lower risk areas. Marco Van Akkeren, an economist with PMI Mortgage Insurance Co., added, "Of the 50 largest housing markets, nine have a probability of a price decline exceeding 40 percent, whereas in twenty of the lower-ranked markets, the probability is less than 10 percent."
    With strong home-price appreciation and relatively weak employment conditions, Boston-Quincy, MA, maintained its first-place ranking with a risk score of 534, denoting a 53.4% probability of an overall house price decline over the next two years. Nassau-Suffolk, NY, ranked second with a score of 511, followed by three California MSAs: Oakland-Fremont-Hayward (487); San Jose-Sunnyvale-Santa Clara (481); and San Diego-Carlsbad-San Marcos (467). After ranking seventh in last quarter's Risk Index, the New York MSA is now divided into four Metropolitan Divisions. Each of these areas presents significantly different risks of home-price declines, and Nassau-Suffolk's weakening affordability after its recent run-up in housing prices has pushed its ranking almost to the top of the Risk Index. California's sizzling real estate market has seen double-digit appreciation rates in most of its metropolitan areas in recent years. Eight California MSAs were ranked in the top thirteen.
    PMI's Risk Index model valued the average risk of the 50 largest MSAs at 202, meaning that, on average, there exists a 20.2 percent probability of an overall house price decline, as measured within the next two years and across the 50 largest housing markets. In the winter 2005 Risk Index, the average was 16.1 percent.
    Part of the increase is due to a change in the underlying data. The PMI Risk Index is based in part on data provided by the Office of Federal Housing Enterprise Oversight (OFHEO). In its most recent report on home-price appreciation, OFHEO expanded its coverage to a total of 379 MSAs and Metropolitan Statistical Area Divisions (MSADs) from 361, prompting a corresponding revision to PMI's Risk Index.
    For example, Detroit increased its Risk Index value by more than 100 points this quarter. In part, this is because the Detroit MSA previously included both Detroit and the less risky Warren metropolitan division. While affordability remains good in the Detroit area, the economic picture remains week. The unemployment rate of 8.97 percent is more than 3 percent above its recent historical average and is the highest among the 50 largest housing markets.
    The three MSAs least likely to exhibit home price declines over the next two years are Cincinnati, Indianapolis, and Pittsburgh. Employment growth is in positive territory in all three MSAs, and affordability remains good, but economic conditions are not particularly favorable, as traditional manufacturing continues to decline in all three MSAs, combined with weakening service sectors in Indianapolis and Cincinnati, and poor population growth in Pittsburgh and Cincinnati.

PMI Risk Index by MSA

Risk Risk MSA Index MSA Index ------------------------------------- -------------------------------- Boston-Quincy, MA 534 Las Vegas-Paradise, NV 108 Nassau-Suffolk, NY 511 Dallas-Plano-Irving, TX 102 Oakland-Fremont-Hayward, CA 487 Austin-Round Rock, TX 101 San Jose-Sunnyvale-Santa Clara, Portland-Vancouver- CA 481 Beaverton, OR-WA 101 San Diego-Carlsbad-San Marcos, CA 467 Kansas City, MO-KS 100 Cambridge-Newton-Framingham, MA 446 Orlando, FL 99 Atlanta-Sandy Springs- Santa Ana-Anaheim-Irvine, CA 431 Marietta, GA 99 Los Angeles-Long Beach- Charlotte-Gastonia- Glendale, CA 404 Concord, NC-SC 97 Sacramento-Arden-Arcade- Phoenix-Mesa-Scottsdale, Roseville, CA 401 AZ 97 San Francisco-San Mateo- Redwood, CA 395 St Louis, MO-IL 90 Providence-New Bedford-Fall Houston-Baytown-Sugarland, River, RI-MA 389 TX 87 Chicago-Naperville-Joliet, Detroit-Livonia, Dearborn MI 379 IL 86 Riverside-San Bernardino- Seattle-Bellevue-Everett, Ontario, CA 339 WA 84 New York-Wayne-White Plains, NY-NJ 331 Fort Worth-Arlington, TX 78 Edison, NJ 313 Philadelphia, PA 72 Minneapolis-St Paul- Milwaukee-Waukesha-West Bloomington, MN-WI 251 Allis, WI 68 Fort Lauderdale-Pompano Beach- Deerfield Beach, FL 236 San Antonio, TX 64 New Orleans-Metairie- Denver-Aurora, CO 208 Kenner, LA 64 Cleveland-Elyria-Mentor, Newark-Union, NJ-PA 206 OH 64 Average 202 Columbus, OH 63 Washington-Arlington- Nashville-Davidson- Alexandria, DC-MD-VA-WV 187 Murfreesboro, TN 62 Miami-Miami Beach-Kendall, FL 182 Memphis, TN-MS-AR 60 Warren-Farmington Hills-Troy, Cincinnati-Middletown, OH- MI 160 KY-IN 58 Tampa-St Petersburg-Clearwater, FL 142 Indianapolis, IN 56 Virginia Beach-Norfolk-Newport News, VA-NC 115 Pittsburgh, PA 55 Baltimore-Towson, MD 114

    The PMI Risk Index

    The PMI Risk Index is a statistical model based on certain measures of economic activity and conditions that PMI believes are predictive of the likelihood of home price declines over the next two years. Factors used to derive the PMI Risk Index include the House Price Index from the Office of Federal Housing Enterprise Oversight, labor market statistics from the Bureau of Labor Statistics and the PMI affordability index, which captures changes in the demand for housing as a function of local median household income and the median mortgage payment.
    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%.
    A complete copy of the latest PMI Economic and Real Estate Trends report containing the latest PMI Risk Index scores and analysis is available at:
    http://www.pmigroup.com/lenders/eret.html.

    About PMI Mortgage Insurance Co.

    PMI Mortgage Insurance Co. is a leading U.S. residential mortgage insurer, licensed in all 50 states, the District of Columbia and Puerto Rico. Residential mortgage insurance protects lenders and investors against potential losses in the event of borrower default. Private mortgage insurance facilitates the sale of low down payment mortgages in the capital mortgage market and expands home ownership opportunities by enabling borrowers to buy homes with down payments of less than 20%. PMI is incorporated in Arizona and headquartered in Walnut Creek, CA.

    Cautionary Statement: Statements in this press release that are not historical facts or that relate to future plans, events or performance are 'forward-looking' statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, PMI's Risk Index and any related discussion, and statements relating to future economic and housing market conditions. Forward-looking statements are subject to a number of risks and uncertainties including but not limited to, the following factors: changes in economic conditions, economic recession or slowdowns, adverse changes in consumer confidence, declining housing values, higher unemployment, deteriorating borrower credit, changes in interest rates, or a combination of these factors. Other risk and uncertainties are discussed in the Company's filings with the Securities and Exchange Commission, including our report on Form 10-Q for the period ended December 31, 2004.

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CONTACT: The PMI Group, Inc. Beth Haiken, 925-658-6192 (Media) Josh Wozman, 925-658-6863 (Media) Bill Horning, 925-658-6193 (Investor)

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: REAL ESTATE BUILDING/CONSTRUCTION INSURANCE BANKING SOURCE: The PMI Group, Inc.

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