Fears that a housing bubble may burst, wiping out a key source of financial wealth for millions and leading to a further surge in already high foreclosure rates, would appear to be overblown in Pittsburgh.

In fact, if housing prices start to fall, a new study says Pittsburgh is the least at risk among the nation's 50-largest markets.

The report, issued by the PMI Group, a New York-based mortgage insurer, said such hot markets as Oakland, Calif., and Cambridge, Mass., have nearly a 50 percent likelihood of seeing price declines in the next two years, while the odds of such a decline here are only 5.5 percent.

One reason for such a low risk of home prices dropping in the region is that they haven't been rising nearly as quickly as in most other markets. While home prices rose 13.4 percent in New York City last year and 30.9 percent in Las Vegas, they were up an average 4.9 percent in the Pittsburgh metropolitan area, PMI said.

A separate study of 99 metro markets by Cleveland-based National City Corp. Chief Economist Richard DeKaser concluded that housing in Pittsburgh is actually priced 5 percent below its fair market value -- that is, what buyers would actually pay for the homes.

The steady but slow appreciation of home prices in the region is typical for Pittsburgh, said Betsy Wotherspoon, an agent in the North Hills office of Prudential Preferred Realty. "We've never had the kind of appreciation that they have in places like California and Texas," said the real estate veteran, who has sold homes for 27 years.

The region's modest price appreciation reflects a sluggish economy and a population that has been declining, rather than growing, for years.

Another, less quantifiable factor may be Pittsburghers' relative conservatism compared with fellow-citizens on the coasts -- not just politically or culturally, but financially, Wotherspoon said. When it comes to real estate, Pittsburghers are less inclined toward speculation.

In California, the combination of low mortgage rates and ever-rising housing prices have led many home buyers to opt for interest-only mortgages, sometimes just to afford a bigger home and sometimes to try and "flip'' the properties -- buying the home and then selling it at even higher price and pocketing the difference.

An interest-only mortgage is structured so that during the early part of the mortgage-- say, the first five years -- the borrower pays only interest, deferring payment on the principal and keeping the payments considerably lower than they otherwise would be.

The use of such mortgages assumes that either the borrower's income will rise during the interest-only period, so that they can afford the increased payments when they need to begin paying down the principal, or that when principal payments become due, they will be able to sell the house for more than what is owed.

But neither of those things is guaranteed, so the interest-only mortgage may be viewed as risky, particularly in slower markets such as Pittsburgh where prices do not rise all that fast.

In California, where home prices have been rapidly appreciating, a reported 61 percent of new mortgages are interest-only. In Pittsburgh, where home buyers are more likely to pay a lot less for the same-size or even a larger house, there is little need to take out a bigger mortgage or even the biggest mortgage they can afford.

As a result, interest in interest-only mortgages is minimal in the region, Wotherspoon said. "We have seen a little more than a handful in the past 12 months," she said.

"Typically, it's a transferee into Pittsburgh who knows they are not going to be here for a long time, or a young professional, like a doctor, who expects to be making a lot more money in five years. The typical Pittsburgher is still looking at the 15- or 30-year fixed-rate loan."

The essence of a bubble is that the prices being paid for something -- whether it is homes, stocks or tulips -- far outstrip any rational value for the thing being bought.

In real estate, analysts have devised a ratio to help determine fundamental value, just as the ratio of a company's stock price to its earnings, the so-called P/E ration, can help to determine the fundamental value of a company's stock.

The housing ratio is calculated by dividing the price of an area's typical home by the amount of rent that home would generate in a year.

For instance, in 2004, the median sale price for a two-bedroom home in Pittsburgh was $112,000, and the fair-market monthly rent for such a home was $653, or $7,836 a year. Dividing the first by the second yields a ratio of 14.29, according to the PMI study.

Another way to think of the ratio is as an answer to the question, "If I rented out this house, how long would it take me to earn back the purchase price?" According to PMI's numbers, in Pittsburgh's current market, it would take about 14 years,

By comparison, metro New York's rent ratio is 25.4, Boca Raton, Fla.'s is 29.4 and San Francisco's is 34.1, according to researcher Economy.com, which conducted a study for The New York Times. So in those markets, it would take more than 25, 29 and 34 years, respectively, to recapture the purchase price through rents.

All of this suggests that buying a house in Pittsburgh, even as an investment, may be a better deal these days than buying one in the "red-hot" markets that are getting so much attention. If PMI's numbers are correct, Pittsburgh will continue to hold up for at least the next several years.

The mortgage insurer's 10-year projections indicate that home prices locally will appreciate by 23.9 percent, vs. declines of 18.5 percent in Los Angeles and 20.7 percent in San Diego.