PMI's Fall 2007 Risk Index Shows Risk of Home Price Declines Near All-Time Highs Despite Minor Improvements in Affordability

WALNUT CREEK, Calif., Oct. 9 /PRNewswire-FirstCall/ -- PMI Mortgage Insurance Co., the U.S. subsidiary of The PMI Group, Inc. (NYSE: PMI) , today released its Fall 2007 U.S. Market Risk Index(SM), which ranks the nation's 50 largest metropolitan statistical areas (MSAs) according to the likelihood that home prices will be lower in two years. For the 50 largest MSAs, the average score, weighted by population, was 329, translating into a 32.9 percent chance that prices will be lower in two years. The average risk score for the 50 largest MSAs was down 17 points, or 1.7 percentage points, from the previous quarter. The index shows that declining home prices have improved affordability, which led to minor decreases in risk scores for most MSAs.

"Home price appreciation rates have slowed significantly and have gone negative in some areas. This will cause some pain in the immediate future. But in order to restore a healthy market balance, prices need to come back in line with incomes," said Mark F. Milner, Chief Risk Officer of PMI Mortgage Insurance Co. "The drop in appreciation rates and slight improvements in affordability caused the average risk score to decline 17 points, the first drop since the fourth quarter of 2004. Despite this slight drop, the risk of price declines remains high nationally, and particularly high in California, the Southwest, and Florida."

Eleven MSAs face a greater than 50 percent chance that home prices will decline, down from 15 MSAs last quarter. Risk remains largely concentrated in California, Florida, Las Vegas, NV, and Phoenix, AZ, and 29 of the nation's largest MSAs still have a better than 30 percent chance for future price declines.

The MSAs that experienced the most significant drops in risk were Boston, MA (down 101 points to 400), West Palm Beach, FL (down 75 points to 532), and Phoenix, AZ (down 71 points to 575). However, risk scores for all three markets remain substantially higher than the national average.

The rate of home price appreciation declined in the second quarter. Since peaking in the second quarter of 2005, appreciation rates have decelerated in seven of the last eight quarters. At the end of the second quarter, prices appreciated at a year-over-year rate of 3.2 percent, a drop from the previous quarter's year-over-year rate of 4.5 percent.

Affordability improved in 299 MSAs, and in all but two of the 50 largest MSAs. The average Affordability Index score for the 50 largest MSAs increased to 88.9 from 86.1 in the first quarter. Improvements in home price affordability across most MSAs resulted from declines in the rate of home price appreciation, coupled with steady income growth.

In addition to the PMI U.S. Market Risk Index showing the risk of price declines, PMI's Fall 2007 Economic and Real Estate Trends(SM) (ERET) also examines the value of homeownership at the national level and focuses on three of the worst regional housing price declines over the last 25 years.

"What we found is that owning a home for ten years during that period was a good strategy to build wealth and increase net worth over the long term," said Milner. "The market's changing tide doesn't necessarily mean it is a bad time to buy or own a house, but it is a reminder that homeownership is a long-term investment. People who are considering buying, as well as those who already own, need to take the long-term view."

A complete copy of the Fall 2007 PMI ERET report 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.

                   PMI Fall 2007 PMI U.S. Market Risk Index

    Rank  MSA                     Score  Rank   MSA                     Score

          Riverside-San
          Bernardino-Ontario,                 Detroit-Livonia-
    1     CA                        608    3  Dearborn, MI  (MSAD)       328

                                              Cambridge-Newton-
          Las Vegas-Paradise,                 Framingham, MA
    2     NV                        587    3  (MSAD)                     323

          Santa Ana-Anaheim-                  Minneapolis-St. Paul-
    2     Irvine, CA  (MSAD)        579    3  Bloomington, MN-WI         313

                                              Warren-Troy-
          Phoenix-Mesa-                       Farmington Hills, MI
    2     Scottsdale, AZ            575    3  (MSAD)                     300

          Los Angeles-Long                    New York-White
          Beach-Glendale, CA                  Plains-Wayne, NY-NJ
    2     (MSAD)                    536    4  (MSAD)                     287

          West Palm Beach-Boca
          Raton-Boynton Beach,                Newark-Union, NJ-PA
    2     FL  (MSAD)                532    4  (MSAD)                     274

          Sacramento-Arden-                   Philadelphia, PA
    2     Arcade-Roseville, CA      522    4  (MSAD)                     227

          San Diego-Carlsbad-                 Atlanta-Sandy
    2     San Marcos, CA            521    4  Springs-Marietta, GA       213

          Oakland-Fremont-                    Chicago-Naperville-
    2     Hayward, CA  (MSAD)       516    4  Joliet, IL  (MSAD)         196

          Fort Lauderdale-
          Pompano Beach-
          Deerfield Beach, FL                 Milwaukee-Waukesha-
    2     (MSAD)                    507    4  West Allis, WI             191

    2     Orlando-Kissimmee, FL     506    4  St. Louis, MO-IL           184

                                              Nashville-Davidson--
          Miami-Miami Beach-                  Murfreesboro--
    3     Kendall, FL  (MSAD)       466    4  Franklin, TN               179

          Tampa-St. Petersburg-
    3     Clearwater, FL            462    4  Kansas City, MO-KS         159

          Washington-Arlington-
          Alexandria, DC-VA-MD-
    3     WV  (MSAD)                439    4  Denver-Aurora, CO          156

          San Jose-Sunnyvale-
    3     Santa Clara, CA           433    4  Austin-Round Rock, TX      154

          Providence-New
          Bedford-Fall River,                 Cleveland-Elyria-
    3     RI-MA                     427    4  Mentor, OH                 154

          Nassau-Suffolk, NY                  Charlotte-Gastonia-
    3     (MSAD)                    427    4  Concord, NC-SC             147
          Virginia Beach-
          Norfolk-Newport News,
    3     VA-NC                     418    4  Columbus, OH               129

          San Francisco-San
          Mateo-Redwood City,                 Cincinnati-
    3     CA  (MSAD)                405    4  Middletown, OH-KY-IN       127

          Boston-Quincy, MA
    3     (MSAD)                    400    4  San Antonio, TX            121
                                              Indianapolis-Carmel,
    3     Jacksonville, FL          377    4  IN                         101

                                              Dallas-Plano-Irving,
    3     Baltimore-Towson, MD      347    5  TX  (MSAD)                  95

          Seattle-Bellevue-                   Houston-Sugar Land-
    3     Everett, WA  (MSAD)       345    5  Baytown, TX                 94

                                              Fort Worth-Arlington,
    3     Edison, NJ  (MSAD)        335    5  TX  (MSAD)                  89

          Portland-Vancouver-
    3     Beaverton, OR-WA          333    5  Pittsburgh, PA              85

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. (NYSE: PMI) . The Risk Index is a proprietary statistical model that measures geographic house price risk by predicting the probability that home prices in the nation's 379 largest metropolitan statistical areas (MSAs) and metropolitan statistical area divisions (MSADs) (as measured by the House Price Index from the Office of Federal Housing Enterprise Oversight (OFHEO)) will be lower in two years. The PMI U.S. Market Risk Index is based on the OFHEO House Price Index, labor market statistics from the Bureau of Labor Statistics, and the PMI Affordability Index, which uses local per capita household income, home price appreciation, and a blended mortgage rate 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 that home prices will be lower in two years.

About PMI Mortgage Insurance Co.

PMI Mortgage Insurance Co. (PMI US), a subsidiary of The PMI Group, Inc. (NYSE: PMI) , 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: http://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 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. 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, 2006 and Form 10-Q for the quarter ended June 30, 2007.