Your home in the Atlanta metro area has less than a one in five chance of
declining in value over the next twenty-four months.

That's the news from the respected Economic Real Estate Trends report
released for the Winter 2007 period. And while that may seem like a
relatively high risk, it's better than the one in three chance of a price
decline the report predicted for homeowners nationally.

The report is based on a number of economic statistics, including the degree
to which price appreciation in any area is accelerating or decelerating. The
model also takes into consideration job growth and unemployment in each area
examined.

Recent trends in the real estate market have affected the increased
likelihood of price declines, according to economists at the PMI Mortgage
Insurance Company, the sponsor of the report.

First, some areas of the country have already seen price declines as a
result of the slowdown in the real estate market. Not surprisingly, many of
these areas are the same ones that saw the most remarkable run-ups in prices
over the past five to seven years.

Because home prices in these hot markets accelerated faster then the ability
of prospective buyers to afford them, buyers were pushed out of the market
and further home price increases became unsustainable.

Perhaps the best example of this type of market in recent years has been the
Phoenix metro area. Between third quarter 2004 and a year later, average
home prices increased over 30 percent. Then during last year, home prices
increased there by another 15 percent.

Economists feel that this level of price increase is so far beyond the
national average that these areas are more likely to experience a drop in
prices in the future.

In contrast, home prices in the Atlanta area rose by less than 6 percent
between third quarter 2004 and 2005, and by another 3.7 percent the
following year. While modest by comparison, this more moderate rate of
increase is more likely to continue.

Thus, the predicted chance of a home price drop in Phoenix is almost 45
percent over the next two years. That predicted rate is more than twice as
high as the rate for the Atlanta area.

Next, the economists looked specifically at affordability as an indicator of
an area's likelihood of future price stability. In other words, if very few
can afford to buy in a community, then it's more likely that sellers will be
forced to lower their prices in order to attract a buyer.

I find this analysis particularly interesting, because Atlanta scores
remarkably well in this area.

In order to calculate affordability, the PMI study looks at median household
income, recent home price appreciation, and the current cost of a 30-year
fixed rate mortgage. These and other factors are used to calculate an
affordability index for a community, based on the affordability of 1995
being set at 100.

Remember that 1995 was the year before the Olympic games came to Atlanta,
and set off a run-up in prices that has lasted for more than a decade.

Not surprisingly, the areas with the worst affordability were clustered on
the west coast, the northeast, and in Florida.

For example, the Los Angeles area is only 57 percent as affordable today as
it was in 1995. San Francisco, which was expensive even then, is today only
72 percent as affordable as it was in 1995. Fort Lauderdale, Florida is only
56 percent as affordable as in 1995, and Miami ranks only a 58 percent
rating.

The Boston metro area came in with a slightly better affordability rating of
80 percent of its 1995 level, while New York could only manage a 72 percent.
In stark contrast, the metro Atlanta area in this recent report achieved an
affordability index rating of 99.8 per cent, indicating that homes in our
area are almost exactly as affordable today as they were in 1995. That is an
extremely health sign, both as evidence of moderate appreciation over the
past decade and, in my opinion, as an indicator of future healthy
appreciation.

In terms of the Risk Index itself, the number seeks to indicate the
predicted likelihood of a home's price declining over the next two years.
As you might expect, the areas with the worst affordability tended to score
highest on the risk index, again with a concentration on the west coast, the
northeast, and in Florida.

Of the worst dozen metropolitan statistical areas measured, fully eight were
in California and four were in the New York, New Jersey and Massachusetts
areas. Several markets in Florida were close behind.

The good news for Atlanta is that our Risk Index score is only 19 percent.
That means that, if this statistical model is right, we have a four in five
chance of avoiding any overall price declines in home values during the next
two years, and that's encouraging to those of us who own today.

It's also good news to developers and builders, and to the thousands of
existing owners who will be offering their homes for resale during the
period.

The other factors helping our score are employment growth over the past year
and unemployment numbers during the same period.

According to the study, Atlanta has recorded job growth of 2.9 percent during the 12 month period since third quarter 2005. That is comparatively strong, and indicates that people are still moving here to fill available
jobs.

In addition, our unemployment rate during that same period was measured at a
relatively low 4.6 percent, well below many other major metro areas. New
York City, Providence, Massachusetts and Los Angeles all topped 5 percent
unemployment, by comparison.

I had an economics professor when I was a student at Emory who assured me
that unemployment could never possibly go below 5 percent. I still don't
know if he was right, but the Atlanta metro area is apparently healthy in
that regard.

The bottom line here is that there are no guarantees of future price
increase, or even home price stability. But it looks like, at least by this
measure, Atlanta's future seems relatively strong.