WALNUT CREEK, Calif., Sept. 19 /PRNewswire-FirstCall/ -- Rapidly slowing appreciation and declining affordability contributed to a marked increase in the risk of home price declines in cities across the country, PMI Mortgage Insurance Co., the U.S. subsidiary of The PMI Group, Inc. (NYSE: PMI) reported today, but strong economic fundamentals continue to underpin many areas. PMI U.S. Market Risk Index(SM) scores increased for all of the nation's 50 largest metropolitan statistical areas (MSAs), resulting in an increase in the average score from 288 to 328, which translates into a 32.8 percent chance that home prices will decline in the next two years. Eighteen MSAs face a greater than 50 percent chance that home prices will decline, up from 13 MSAs last quarter. A podcast summarizing the report is available at http://www.qrelease.com/podcast/pmi/.

"No one should be surprised by the slowdown we're seeing," said Mark F. Milner, Chief Risk Officer of PMI Mortgage Insurance Co. "Over the past five years home prices appreciated much faster than incomes, and that can't continue forever. But there are tried and true strategies for surviving the changing market. For companies, those with nationally diversified portfolios should be in good shape to weather the changes we're seeing. For individuals, it's important to remember that home ownership is a long-term investment, not a short-term market trade."

While year-over-year appreciation remained in the double digits in 20 MSAs and topped 20 percent in four -- Phoenix, AZ and Orlando, Miami, and Tampa, FL -- the rate of appreciation slowed in 41 of the 50 largest MSAs. In 13 areas, appreciation dropped below the historical norm of roughly 4 to 6 percent. Detroit recorded the only year-over-year decline among the top 50 MSAs, of 0.61 percent.

The risk of price declines continues to be concentrated in California and along the Eastern Seaboard. Of the 18 MSAs facing a greater than 50 percent chance of a price decline, eight are in California (San Diego, Sacramento, Oakland, Santa Ana, Riverside, Los Angeles, San Jose, and San Francisco) and eight are in the northeast (Nassau-Suffolk and New York, NY, Boston and Cambridge, MA, Providence, RI, Edison and Newark, NJ, and Washington, DC). The remaining two are Fort Lauderdale, FL and Las Vegas, NV.

In addition to the PMI U.S. Market Risk Index showing the risk of price declines, PMI's Fall 2006 Economic and Real Estate Trends(SM) (ERET) examines major regional trends, as well as statistics commonly used to judge the housing market's current health and future prospects.

According to PMI's Affordability Index(SM), a proprietary index that is one component of the Risk Index, affordability dropped in all 50 MSAs, in part because interest rates hit a high of about 6.78 percent during the second quarter, compared to 6.47 percent late in the third quarter. Twelve MSAs now have Affordability Index scores below 70, a threshold below which an area is particularly vulnerable to economic shock. With a score of 56.78, Fort Lauderdale, FL, is again the least affordable area among the 50 largest MSAs.

Milner commented, "Over the past five years, house prices in the United States have appreciated more than 56 percent, on average, and much more in some areas. In the same time period, incomes increased just 25 percent. That's why affordability has decreased so much in many areas. Going forward, house prices and incomes need to come back into balance so that more Americans can afford to buy homes without resorting to loans that expose them to interest rate risk and the risk of payment shock."

In most areas, the risk of price declines continues to be balanced by strong economic fundamentals. With the exception of the upper Midwest, unemployment remains low in most of the country and job growth is positive. Of the top 50 MSAs all but four -- Detroit and Warren, MI, Newark, NJ, and New Orleans, LA -- saw employment growth. Las Vegas led the nation in employment growth at 5.32 percent over the past year, followed closely by Phoenix, AZ at 5.20 percent. In the upper Midwest, rising unemployment is putting pressure on prices, resulting in Detroit's year-over-year decline.

A complete copy of the Fall 2006 PMI ERET report, a podcast of results, and an appendix that provides data for all U.S. MSAs is available at http://phx.corporate-ir.net/phoenix.zhtml?c=63356&p=irol-publications.

                     Fall 2006 PMI U.S. Market Risk Index

     San Diego-Carlsbad-San Marcos, CA                       603
     Sacramento-Arden-Arcade-Roseville, CA                   601
     Oakland-Fremont-Hayward, CA                             600
     Santa Ana-Anaheim-Irvine, CA                            599
     Nassau-Suffolk, NY                                      598
     Riverside-San Bernardino-Ontario, CA                    596
     Boston-Quincy, MA                                       596
     Providence-New Bedford-Fall River, RI-MA                590
     Los Angeles-Long Beach-Glendale, CA                     590
     San Jose-Sunnyvale-Santa Clara, CA                      589
     San Francisco-San Mateo-Redwood City, CA                587
     Edison, NJ                                              578
     Cambridge-Newton-Framingham, MA                         566
     New York-White Plains-Wayne, NY-NJ                      543
     Fort Lauderdale-Pompano Beach-Deerfield Beach, FL       541
     Las Vegas-Paradise, NV                                  540
     Washington-Arlington-Alexandria, DC-VA-MD-WV            540
     Newark-Union, NJ-PA                                     531
     Miami-Miami Beach-Kendall, FL                           471
     Baltimore-Towson, MD                                    432
     Virginia Beach-Norfolk-Newport News, VA-NC              413
     Tampa-St. Petersburg-Clearwater, FL                     404
     Minneapolis-St. Paul-Bloomington, MN-WI                 393
     Detroit-Livonia-Dearborn, MI                            379
     Phoenix-Mesa-Scottsdale, AZ                             353
     Orlando-Kissimmee, FL                                   313
     Warren-Troy-Farmington Hills, MI                        234
     Atlanta-Sandy Springs-Marietta, GA                      201
     Denver-Aurora, CO                                       187
     Philadelphia, PA                                        179
     New Orleans-Metairie-Kenner, LA                         167
     Portland-Vancouver-Beaverton, OR-WA                     158
     Seattle-Bellevue-Everett, WA                            153
     Chicago-Naperville-Joliet, IL                           147
     Milwaukee-Waukesha-West Allis, WI                       140
     St. Louis, MO-IL                                        133
     Austin-Round Rock, TX                                   114
     Kansas City, MO-KS                                      109
     Charlotte-Gastonia-Concord, NC-SC                        98
     Dallas-Plano-Irving, TX                                  89
     Houston-Sugar Land-Baytown, TX                           88
     Nashville-Davidson-Murfreesboro, TN                      86
     San Antonio, TX                                          78
     Fort Worth-Arlington, TX                                 76
     Columbus, OH                                             74
     Cleveland-Elyria-Mentor, OH                              74
     Cincinnati-Middletown, OH-KY-IN                          72
     Memphis, TN-MS-AR                                        68
     Indianapolis-Carmel, IN                                  63
     Pittsburgh, PA                                           61

About PMI's Economic & Real Estate Trends(SM) (ERET) and U.S. Market Risk Index(SM)

The PMI Economic and Real Estate Trends (ERET) containing the US Market Risk Index is published quarterly by PMI Mortgage Insurance Co., a subsidiary of The PMI Group, Inc. The Risk Index is a proprietary statistical model that measures geographic house-price risk by predicting 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. The PMI U.S. Market Risk Index is based on the House Price Index from the Office of Federal Housing Enterprise Oversight (OFHEO), labor market statistics from the Bureau of Labor Statistics, and the PMI Affordability Index, which uses local median household income, home price appreciation, and the price of a conventional mortgage to calculate the local share of mortgage payment to income relative to its baseline year of 1995.

The PMI U.S. Market Risk Index scale ranges from one to 1,000 and translates to a percentage. For example, a score of 100 indicates a 10 percent chance of a decline in home prices over the next two years. A higher score indicates a higher likelihood of future home price declines. The Risk Index scale is linear. In other words, an increase in risk index score of 100 percent (for example, from 100 to 200) indicates that the risk of home price decline has doubled. Conversely, a decline in Risk Index score by 50 percent (from 100 to 50) indicates that the risk of home price decline has declined by 50 percent. The Affordability Index score is linear against a baseline of 100 in 1995. For example, an Affordability Index score of 85 means that the median home in that area is 15 percent less affordable than it was in 1995.

About PMI Mortgage Insurance Co.

PMI Mortgage Insurance Co. (PMI US), a subsidiary of The PMI Group, Inc., provides residential mortgage insurance to mortgage lenders, capital market participants, and investors throughout the United States. PMI US is incorporated in Arizona, headquartered in Walnut Creek, CA, and licensed in all 50 states, the District of Columbia, Puerto Rico, Guam, and the Virgin Islands. By mitigating default risk, residential mortgage insurance expands home ownership opportunities and assists financial institutions in reducing the capital they are required to hold against low down payment mortgages. PMI US is rated AA by Standard and Poor's, Aa2 by Moody's, and AA+ by Fitch. For more information: www.pmi-us.com.

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 U.S. Market Risk Index and any related discussion, and statements relating to the cooling of the U.S. housing market as well as 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, the effects of Hurricane Katrina or other natural disasters, or a combination of these factors. Readers are cautioned that any statements with respect to future economic and housing market conditions are based upon current economic conditions and, therefore, are inherently uncertain and highly subject to the changes in the factors enumerated above. Other risk and uncertainties are discussed in the Company's filings with the Securities and Exchange Commission, including our report on Form 10-K for the year ended December 31, 2005 and Form 10-Q for the quarter ended June 30, 2006.

SOURCE PMI Group, Inc.
09/19/2006
CONTACT: Media: Beth Haiken, +1-925-658-6192, or Investors: Bill Horning, +1-925-658-6193, both of PMI Group, Inc.
Web site: http://www.pmigroup.com
(PMI)