Professional Full-time Real Estate Agent

As a real estate investor, are you risk-averse? Or do you actively look for markets where foreclosures are rampant, bank-owned houses represent a significant part of the local inventory, and all the signs point to more trouble ahead?

Either way -- you should be interested in the Spring 2008 "risk index" released last week by private mortgage insurance giant PMI Group. As the name implies, the index ranks the 50 largest metropolitan areas in the country on the basis of equity risk - the statistical probability that property values will be lower 24 months from now.

The riskiest markets tend to be those with rising unsold inventories of housing, declining sales, and -- if not the proverbial "blood running in the streets," -- lots of distressed real estate.

For those of you who are risk averse: Think Texas! Five of the top ten safest markets in the U.S., according to the index, are in the Lone Star state. They have less than a one percent chance of property devaluations, and the list includes: Fort Worth, Dallas, San Antonio, Houston and Austin.

Now that's not to suggest that you can just go out and buy any piece of property willy-nilly in these markets and not lose money. Rather, the index estimates the likelihood of overall, metropolitan-wide valuation declines.

Other large, low-risk real estate markets, according to PMI, are Charlotte, North Carolina, Kansas City, Missouri, and Pittsburgh, PA.

But what if you are attracted to high-risk markets because of the plentiful opportunities they offer to pick up foreclosures, short sales, and the like? Well, in that case, set your sights on Riverside-San Bernadino, California -- the number one riskiest market in the U.S.

Las Vegas comes in as number two -- no big surprise there, given all the unsold condos. Fort Lauderdale, Florida is ranked number three, Orlando number four and Phoenix number five.

The rest of the riskiest top ten are all in Florida or California, and include Santa Ana, West Palm Beach, Sacramento, Tampa-St. Petersburg, Los Angeles, San Diego, Oakland, and Miami.

Equally of interest in the latest index: What major markets offer investors only moderate risks, with some potential for further distress, but nothing extreme, along with some potential for stability or even equity appreciation? Here's a quick look: Boston, which two years ago topped the high-risk list, is now down to a mere 20 percent probability of lower values down the road. Conditions have stabilized there.

Washington D.C. is in the same moderate-risk category, thanks to strong employment and high household incomes, along with San Francisco and the Long Island suburbs of New York.

Published: April 18, 2008

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