If you have ever purchased a home with less than 20% down you have most likely heard the term “mortgage insurance”. Mortgage insurance is required to be purchased by the buyer when the equity is not sufficient to cover the risk. Different loan types require either an up-front payment or monthly payments. The mortgage insurance companies then insure the mortgage holders from some of their loss on that house in case of foreclosure, etc. Mortgage insurance companies only lose money when values drop and they are very careful (now more than ever) where they will insure properties and what they charge for their insurance.
Mortgage insurance companies are a great source for market information. They do research throughout the nation regarding the strength of local real estate markets. I thought it would be useful to see how a few companies see the Boulder and Denver markets. It is great information from companies who have much to lose if their risk projections are wrong.
First let’s look at PMI. PMI uses a statistical model that assigns each Metropolitan Statistical Area (MSA) with a risk factor. This risk factor tells the percentage chance that the prices will fall over the next year. The chart below shows the highest risk areas. These markets show a 99.9% chance that prices will drop during the next year.
Boulder County has its own MSA and our prices have been pretty steady. Over the next year PMI says that there is only a 12% chance that prices will drop over the next year. This, for them Boulder is a low risk area.
Another company who does this type of analysis is MGIC.
MGIC ranks the largest MSA’s nationwide and gives a prediction on which direction the market is headed. They don’t rank Boulder, but they do rank Denver. Denver, which includes 11 metro counties, is listed as soft but “improving”. This is the only market in the country which is classified as an improving market. These third parties who are notoriously conservative see a brighter than average future for our area and this reinforces my optimism.
Some great charts, facts and figures regarding the Boulder/Denver Real Estate market. What is concerning me (only with FHA at this point) are the increases of the PMI from 1.75 to 2.25. Also the (on the street) rumor that FHA will be going from a minimum of 3.5% to 5% down payment and if the buyer has a fico score 580 or under it will be 10%. Tightening of rules before a bailout is needed. Also the fed in March will stop buying mortgages and increases will be on the way. Great we have one of the stronger markets.