There are "two distinctly different paths" for housing in America right now, says Mortgage insurer PMI Group's latest report on the risk of falling home prices . Most of the nation's housing markets are showing signs of improvement, but the inflated markets in California and Florida are showing signs of further deterioration amid rising foreclosures.

"Risk continued to intensify in many of the metropolitan areas where home price growth had significantly exceeded historical norms, but continued to decline in many other areas across the country," reports PMI addressing the risk of falling prices over the next two years.

35 of the 50 largest metropolitan areas in America risk of future price declines decreased in the first quarter. However, in California, the risk of price declines increased in 25 of the state's 28 metropolitan areas.

According to PMI, the main shadow over the state's real estate markets:foreclosures, which tend to drive down prices. PMI did find one sign indicating that California's market may be normalizing: excess housing supply is declining in many markets -- the supply of unsold inventory in Orange County, for example, dropped from 29.0 months' worth in late 2007 to 20.3 months in early 2008. In Los Angeles, inventory declined from 18.7 months to 17.9 months, PMI reports.

PMI uses economic, housing and mortgage market factors, including home price appreciation, employment affordability, excess housing supply, interest rates and foreclosure activit to calculate "risk index".

Here's PMI Group's list of the cities with the highest "risk factors" in the first quarter of 2008 (A "risk factor" of 85% means PMI believes there is an 85% chance of declining property values in the next two years):

 National Rank              City                          Risk index

1)   Riverside-San Bernardino-Ontario       95.5%
2)   Fort Lauderdale-Pompano Beach       92.2%
3)   W. Palm Beach-Boca Raton               91.9%
4)   Orlando-Kissimmee                           91.1%
5)   Las Vegas                                        88.1%
6)   Tampa-St. Petersburg                        86.6%
7)   Santa Ana-Anaheim-Irvine                  85.8%
8)   Los Angeles-Long Beach-Glendale     85.7%
9)   Miami-Miami Beach                            84.8%
10) Sacramento                                       82.2%

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