New Report Finds Strong Fundamentals Continue to Drive Home Prices Higher Than Inflation

Arch MI Fall 2016 Housing and Mortgage Market Review® Finds Risk of Home Price Declines is Limited Only to Energy-Dependent States

WALNUT CREEK, Calif.--()--The likelihood of home price declines across the United States over the next two years remains very low at only 4 percent, according to the Fall 2016 Housing and Mortgage Market Review (HaMMR) published by Arch Mortgage Insurance Company (“Arch MI”), which contains the latest Arch MI Risk Index® model results. This is down from an average of 6% a year ago and 13% two years ago. Despite the low overall risk of home price declines, some areas in the energy-extraction (coal-, oil- or natural gas-producing) states are experiencing decelerating home price growth and remain at heightened risk for declines in home prices.

“Apart from some underlying issues that continue to hold back the housing sector, ranging from weak wage growth to skyrocketing student debt, strong dynamics are now in place that will continue pushing up home prices faster than inflation for the foreseeable future,” said Dr. Ralph G. DeFranco, Global Chief Economist, Mortgage Services of Arch Capital Services Inc. ”Positive fundamentals in today’s housing market include affordability, job growth, a shortage of housing, rising rents and underpriced or fairly valued housing in most areas of the country. Given these positives for home prices, it isn’t surprising that there is a low probability home prices will decrease in two years.”

The report, released today by Arch MI and posted on, 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 that home prices will be lower in two years, based on recent economic and housing market data.

The Fall 2016 edition also features a special report on regional oil shocks and the home price index that compares the decline in oil prices over the past two years to the oil shock of the mid-1980s. Although there was a similar decline in crude oil prices of roughly 60 percent both then (November 1985 to March 1986) and now (June 2014 to year-end 2015), the size of the employment shock in the 1980s was far larger than the most recent event. Today’s housing market has been less affected by the decline in oil prices, thanks to both a greater economic diversity and because the 1980s home price drop was amplified by the savings and loan crisis.

Detailed and interactive regional graphs and maps are also available, showing relative over- or undervalued home prices, at

On a state level, North Dakota, Wyoming and West Virginia remain the states most at risk of home prices declines. The economies in these three states are currently in recession with weakening employment, due primarily to declines in energy-related jobs.

  • North Dakota has the highest Arch MI Risk Index value at 47 (indicating a 47 percent chance of a price decline of any magnitude over the next two years), down slightly from a Risk Index value of 52 in the Summer 2016 report. North Dakota experienced a 2.2 percent drop in year-over-year total employment (the second largest employment decline in the nation) and the state’s home prices are estimated to be overvalued by 21 percent relative to historic norms.
  • Wyoming has an Arch MI Risk Index value of 44, compared to a Risk Index value of 46 in last quarter’s report. Wyoming’s mining and energy-related jobs comprise 10 percent of the state’s employment, the highest percentage in the nation, and have declined by approximately 20 percent from their peak. Home prices did tick up in the second quarter of 2016 but employment fell 3.4 percent from a year earlier.
  • West Virginia has an Arch MI Risk Index value of 31, modestly down from 35 in last quarter’s report. The state’s unemployment rate is relatively high at 6 percent, as approximately 20 percent of the state’s coal and gas workers were laid off during the past year.

Within the Arch MI Risk Index values for the 50 most populous Metropolitan Statistical Areas (“MSAs”), only one MSA remains in the “elevated risk” category and one in the “moderate risk” category. In the “elevated risk” category Houston-The Woodlands-Sugarland, TX, has a Risk Index value of 30 and in the “elevated risk” category Fort-Worth-Arlington, TX, registered a Risk Index value of 9.

Fall 2016 Arch MI Risk Index®

10 Riskiest States and 10 Riskiest Large MSAs

Highest Risk States Highest Risk in the 50 Largest MSAs







Change from

Prior Year







Change from

Prior Year

Elevated   North Dakota   47   4 Elevated  

Woodlands-Sugar Land,

  30   -6
Elevated   Wyoming   44   8 Moderate  

Fort Worth-Arlington,

  9   -18
Elevated   West Virginia   31   26 Low  

San Antonio-New
Braunfels, TX

  9   -30
Moderate   Oklahoma   27   1 Low  

Lakewood, CO

  6   -2
Moderate   Alaska   25   -10 Low  

Scottsdale, AZ

  5   -5
Moderate   New Mexico   20   -5 Low  


  5   -27
Moderate   Louisiana   18   -9 Low  

Austin-Round Rock,

  5   -24
Low   Texas   9   -20 Low  

West Palm Beach-Boca
Raton-Delray Beach,

  5   -25
Low   Mississippi   8   4 Low  

Franklin, TN

  3   -4


  5   3 Low  

Fort Lauderdale-
Pompano Beach-
Deerfield Beach, FL

  3   -15

Dr. DeFranco will be hosting two webinars discussing the implications of the latest Housing Review during the week of September 26th, 2016. Registration is free at

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 two years from the date of the input data release. 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 Index can be reviewed at


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 Walnut Creek, CA, 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


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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.


Arch Mortgage Insurance Company
Bill Horning, 925-658-6193
Method Communications
Ramona Radlingshafer, 415-849-1322


Arch Mortgage Insurance Company
Bill Horning, 925-658-6193
Method Communications
Ramona Radlingshafer, 415-849-1322