Latest Report Finds Risk of Home Price Declines Remains “Ultra-Low”

Arch MI Spring 2017 Housing and Mortgage Market Review®

Finds Risk Conditions Are in Place for Home Prices to Grow Faster Than Incomes

GREENSBORO, N.C.--()--The likelihood of home price declines across the United States over the next two years remains unusually low at only 4 percent, according to the latest Arch MI Risk Index® statistical model results reported in the Spring 2017 edition of The Housing and Mortgage Market Review (HaMMRSM) published by Arch Mortgage Insurance Company (“Arch MI”). This is down from an average, across all states and large cities, from 5% a year ago and 8% two years ago. Overall, risk was stable this quarter, with minor changes in the riskiest regions, which predominantly remain in the coal-, oil- or gas-producing areas. No state had greater than a 50% chance of home price declines, suggesting home price growth is likely and will be widely shared.

“The vast majority of housing markets across the nation remain healthy and are projected to stay that way through 2018,” said Dr. Ralph G. DeFranco, Global Chief Economist, Mortgage Services of Arch Capital Services Inc. ”Looking back at 2016, home prices grew 6% and rose in all 50 states. This year, conditions are in place for home prices to grow faster than incomes as a result of a tightening job market, still relatively low interest rates, tight supply and an overall shortage of housing.”

The HaMMR report, released today by Arch MI, a leading provider of private mortgage insurance and wholly owned subsidiary of Arch Capital Group Ltd., presents the state- and metro-level Arch MI Risk Index model results analyzing the likelihood that home prices will be lower in two years, based on recent economic and housing market data. The report is posted on archmi.com/hammr.

The Spring 2017 edition also features a special report on Millenials’ mobility patterns and “Best Cities for Sellers and Buyers.” The latter is based on data from the Months’ Supply of Homes for Sales, which is the number of homes currently listed for sale divided by the number of homes sold last month. Nationwide, there are a third fewer homes listed for sale than normal, tilting the bargaining power in favor of sellers.

Detailed and interactive regional graphs and maps showing relative over- or undervalued home prices are also available at archmi.com/hammr.

On a state level, North Dakota, Wyoming and Alaska remain the three states most at risk of home prices declines. These states continue to be impacted by weak employment and home sales due to the unwinding of the energy boom or from high inventories of homes for sale.

  • North Dakota has an Arch MI Risk Index value of 38 (indicating a 38 percent chance of a price decline of any magnitude over the next two years), up slightly from a Risk Index value of 36 in the Winter 2017 report. Home sales are weak in the state and home price growth is decelerating. Additionally, home prices are high relative to their historical relationship to incomes.
  • Wyoming has an Arch MI Risk Index value of 36 compared to last quarter’s Risk Index value of 38. The state remains in recession due to the decline in mining employment, but the decline in total employment appears to be moderating.
  • Alaska has an Arch MI Risk Index value of 31, up modestly from 26 in last quarter’s report. The state of Alaska remains in recession due to declining oil production and significant state budget deficits. Home price growth is decelerating and declines in total employment have yet to stabilize.

Within the Arch MI Risk Index values for the 50 most populous Metropolitan Statistical Areas (“MSAs”), all MSAs register in the “low” and “minimal” risk category.

Spring 2017 Arch MI Risk Index®

 

10 Riskiest States and 10 Riskiest Large MSAs

         
Highest Risk States Highest Risk in the 50 Largest MSAs

Risk

Rank

  State  

Latest

Risk Index

 

1-Year

Change

  Risk  

  Rank  

  MSA  

Latest

Risk Index

 

1-Year

Change

Moderate   North Dakota   38   -9 Low  

Miami-Miami Beach-
Kendall, FL

  17   15
Moderate   Wyoming   37   -3 Low  

West Palm Beach-
Boca Raton-Delray
Beach, FL

  12   9
Moderate   Alaska   31   0 Low   Baton Rouge, LA   14   -16
Low   Louisiana   17   -13 Low   New Orleans-Metairie, LA   16   -14
Low   Mississippi   10   1 Low   Albuquerque, NM   15   -15
Low   New Mexico   15   -15 Low   Oklahoma City, OK   21   -3
Low   Oklahoma   21   -3 Low   Tulsa, OK   19   -5
Low   West Virginia   21   -14 Low  

Houston-The
Woodlands-Sugar
Land, TX

  19   -20
Minimal   Alabama   2   0 Low   Birmingham-Hoover, AL   2   0
Minimal   Arizona   4   1 Low  

Little Rock-North
Little Rock-Conway,
AR

  2   0
           

Dr. DeFranco will be hosting two webinars discussing the implications of the latest Housing Review during the week of April 3, 2017. Registration is free at archmi.com/hammr.

About Arch MI’s Housing & Mortgage Market Review and Risk Index

The Housing & Mortgage Market Review®, which presents Arch MI Risk Index® results, is published quarterly by Arch Mortgage Insurance Company. The Risk Index is a proprietary statistical model that measures home price risk by estimating the probability that home prices in a state or one of the nation’s 401 largest metropolitan statistical areas (MSAs) will be lower in two years. For example, a score of 25 indicates a 25 percent chance the FHFA All-Transactions Regional Housing Price Index (HPI) will be lower in two years. The Arch MI Risk Index weights various local economic and housing market factors, such as affordability, unemployment rates, economic growth rates, net migration, housing starts, etc., based on a statistical model built on data going back to the early 1980s. It estimates the likelihood of seeing negative home prices and does not indicate the size of any declines. The Arch MI Risk Index is updated after each quarterly release of the FHFA All-Transactions Regional HPI. The complete current set of Risk Index values can be reviewed at archmi.com/hammr.

ABOUT ARCH MORTGAGE INSURANCE COMPANY

Arch Capital Group Ltd.’s U.S. mortgage insurance operation, Arch MI, is a leading provider of private insurance covering mortgage credit risk. Headquartered in Greensboro, North Carolina, with significant operations in Walnut Creek, California, Arch MI's mission is to protect lenders against credit risk, while extending the possibility of responsible homeownership to qualified borrowers. Arch MI’s flagship mortgage insurer, Arch Mortgage Insurance Company, is licensed to write mortgage insurance in all 50 states, the District of Columbia, and Puerto Rico. For more information, please visit archmi.com.

The Housing and Mortgage Market Review and Arch MI Risk Index are registered marks of Arch Capital Group (U.S.) or its affiliates. HaMMR is a service mark of Arch Capital Group (U.S.) or its affiliates.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward−looking statements. This release or any other written or oral statements made by or on behalf of Arch Capital Group Ltd. and its subsidiaries may include forward−looking statements, which reflect our current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this release are forward−looking statements.

Forward−looking statements can generally be identified by the use of forward−looking terminology, such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe" or "continue" or their negative or variations or similar terminology. Forward−looking statements involve our current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes the following: adverse general economic and market conditions; increased competition; pricing and policy term trends; fluctuations in the actions of rating agencies and our ability to maintain and improve our ratings; investment performance; the loss of key personnel; the adequacy of our loss reserves, severity and/or frequency of losses, greater than expected loss ratios and adverse development on claim and/or claim expense liabilities; greater frequency or severity of unpredictable natural and man-made catastrophic events; the impact of acts of terrorism and acts of war; changes in regulations and/or tax laws in the United States or elsewhere; our ability to successfully integrate, establish and maintain operating procedures as well as integrate the businesses we have acquired or may acquire into the existing operations; changes in accounting principles or policies; material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements; availability and cost to us of reinsurance to manage our gross and net exposures; the failure of others to meet their obligations to us; and other factors identified in our filings with the U.S. Securities and Exchange Commission.

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. All subsequent written and oral forward−looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. We undertake no obligation to publicly update or revise any forward−looking statement, whether as a result of new information, future events or otherwise.

Contacts

Arch Capital Services, Inc.
Greg Hare, 336-333-0416
or
Method Communications
Ramona Radlingshafer, 415-849-1322

Contacts

Arch Capital Services, Inc.
Greg Hare, 336-333-0416
or
Method Communications
Ramona Radlingshafer, 415-849-1322