The risk of home prices dropping even lower in the next two years is stabilizing in most Metropolitan Statistical Areas (MSAs), according to the PMI Mortgage Insurance Risk Index. The decline in the risk of house values falling further may indicate a bottoming out of the market. The index charts the chance that home prices will rise or fall along a yearly timeline. To do this, PMI analysts translate a percentage, which predicts the probability that house prices will be lower in two years, into a Risk Index score. A score of 100 means there is a 100% chance that the prices will be lower in two years for that MSA. According to the latest Index, risk may have peaked for many MSAs, though the average risk score remains “very high.” In Q309, risk dropped in 22 of the top-50 MSAs. Of all the 384 MSAs measured in the Index, 212, slightly more than half, had decreases in risk scores. But even though risk declined in the majority of MSAs, the average risk score stayed above 50, dropping for the first time in over a year from 58.3 to 57.5. MSAs in Florida, California, Nevada and Arizona continued to have the highest risk scores in the nation during Q309. All MSAs in Florida, Nevada and Arizona have risk scores in the 90s. But California showed some improvement. Of the 28 MSAs measured in California, 25 saw decreases in risk scores from Q209 to Q309. North Dakota, South Dakota, Nebraska and Vermont continue to show minimal risk. North Dakota leads the nation with the lowest risk score of 1.6. The largest quarterly gains came in Illinois, a gain of 11.6 points, and Ohio, which saw a gain of 10.9 points. Utah and Washington had the biggest falls in risk – down 9.2 points and 14.4 points, respectively. The leading MSAs in terms of risk correspond closely with the MSAs holding the highest foreclosure rates in the RealtyTrac Year-End 2009 Foreclosure Report. In the PMI Risk Index, Las Vegas had a 99.9 risk score. In the RealtyTrac report, it had the highest foreclosure rate at 12.04%. The Cape Coral-Fort Myers MSA in Florda had a 99.9 risk score in the PMI Risk Index. According to RealtyTrac, Cape Coral-Fort Myers had the second highest foreclosure rate at 11.87%. According to the PMI report, increases in housing supplies, higher unemployment and heightened foreclosure rates boost the risk of lower prices over the next two years in many MSAs. “On the other hand, increased affordability and decreasing foreclosure rates in some MSAs are helping lower risk scores in many areas,” according to the PMI Index. Write to Jon Prior.