GREENSBORO, N.C.--(BUSINESS WIRE)--While the risk of price declines remains low, affordability is increasingly a concern in cities across the U.S., according to the Summer 2017 edition of The Housing and Mortgage Market Review (HaMMR℠), published by Arch Mortgage Insurance Company (“Arch MI”). San Francisco’s housing costs are the highest in the country, while Detroit’s are the cheapest. Of the nation’s 10 least affordable cities, seven are in California. Meanwhile price declines are less of a concern, as strong housing market fundamentals suggest the average risk of home price declines over the next two years remains unusually low at only 4%. The Arch MI Risk Index® statistical model is based on nine housing market health indicators, including unemployment and delinquency rates and if home prices are over- or undervalued relative to incomes.
“A tight job market, interest rates that are still low and an overall shortage of housing are pushing up home prices faster than incomes,” said Dr. Ralph G. DeFranco, Global Chief Economist, Mortgage Services of Arch Capital Services Inc. “That’s good news for those who already own, but bad news for those looking to buy. I expect prices and rates to rise, meaning affordability will only worsen from here. In fact, once mortgage interest rates reach 5%, homeownership in high-cost areas like California could be out of reach for many people who qualify now.”
Over the past two years, affordability has deteriorated the most in San Diego, Miami and the San Francisco Bay Area, as prices shot up faster than incomes. The greater New York City metropolitan area, in contrast, saw the largest improvement in affordability, due to a temporary building boom triggered by the expiration of a local tax credit at the end of 2015. Still, New York is more expensive, relative to median incomes, than all but nine American metro areas.
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 of the likelihood home prices will be lower in two years, based on recent economic and housing market data. The report is posted at archmi.com/hammr. The Summer 2017 edition also features a special focus on affordability, including articles on America’s least and most affordable cities, the biggest changes in affordability and the potential impact of an interest-rate increase on mortgage affordability.
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, Alaska, North Dakota and Wyoming remain most at risk of home price declines, joined this quarter by West Virginia. 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), unchanged from last quarter. 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 30 compared to last quarter’s Risk Index value of 36. The state remains in recession due to the decline in mining, but employment appears to be moderating.
- Alaska has an Arch MI Risk Index value of 33, up modestly from 31 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.
- West Virginia has an Arch MI Risk Index value of 27, up from 21 last quarter, largely due to continued employment weakness.
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.
Summer 2017 Arch MI Risk Index®
10 Riskiest States and 10 Riskiest Large MSAs
|Highest Risk States||Highest Risk in the 50 Largest MSAs|
|Moderate||North Dakota||38||-14||Low||Houston-The Woodlands-Sugar Land, TX||19||-20|
|Moderate||Alaska||33||3||Low||Miami-Miami Beach-Kendall, FL||17||15|
|Moderate||Wyoming||30||-16||Low||West Palm Beach-Boca Raton-Delray Beach, FL||13||9|
|Moderate||West Virginia||27||-8||Minimal||Denver-Aurora-Lakewood, CO||8||6|
|Low||Oklahoma||20||-6||Minimal||Anaheim-Santa Ana-Irvine, CA||8||6|
|Low||Louisiana||17||-11||Minimal||Austin-Round Rock, TX||7||1|
|Low||New Mexico||12||-18||Minimal||Fort Worth-Arlington, TX||7||-9|
|Minimal||Mississippi||10||2||Minimal||San Antonio-New Braunfels, TX||7||-2|
Dr. DeFranco will be hosting two webinars discussing the implications of the latest Housing Review on Thursday, July 13 and Friday, July 14. 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.
Detailed, interactive regional graphs and maps are available on Arch MI’s website, showing relative over- or undervalued home prices at archmi.com/HPI-Charts-and-Maps.
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 is a marketing term for Arch Mortgage Insurance Company, Arch Mortgage Guaranty Company, United Guaranty Residential Insurance Company and United Guaranty Mortgage Indemnity Company. 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 the Arch MI Risk Index are registered marks of Arch Mortgage Insurance Company. HaMMR is a service mark of Arch Mortgage Insurance Company.
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