Housing Bubble Nowhere in Sight for U.S. Housing Market

Arch MI’s Fall 2017 Housing and Mortgage Market Review Finds Housing Prices Steady across Most States, with “Hot” Markets Expanding

GREENSBORO, N.C.--()--Housing markets around the nation are expected to remain healthy through at least the end of 2018, with no housing bubble in sight and no projection of home prices falling, according to the Fall 2017 edition of The Housing and Mortgage Market Review® (HaMMR), released today by Arch Mortgage Insurance Company (“Arch MI”).

The HaMMR features the Arch MI Risk Index®, a statistical model based on recent housing market indicators. The index suggests that over the next two years, the probability of home price declines in America’s 401 largest cities averages just 4 percent—an unusually low number. This trend reflects broad-based favorable fundamentals, such as a tightening job market, relatively low interest rates, a low number of homes for sale and an overall housing shortage.

“People waiting for home prices to fall before buying may want to change their strategy, as the overall housing market is expected to stay strong for the foreseeable future,” said Dr. Ralph G. DeFranco, Global Chief Economist, Mortgage Services of Arch Capital Services Inc. “Our research shows no housing bubble is forming in the United States, with prices overall near historic norms compared to incomes.”

The HaMMR also reports that some of the recent concern about U.S. home prices hitting all-time highs is overblown. This is because, after adjusting for inflation, national home prices are still 10 percent below their prior peak. Of course, recovery from the housing crash is not universal. While prices have increased in Colorado, Idaho, North Dakota and the Pacific Northwest (Washington and Oregon), areas like New England and energy-extraction states like Alaska, West Virginia and Wyoming are growing more slowly.

Commentary resources:

  • The HaMMR report is posted at archmi.com/hammr. The Fall 2017 edition summarizes current U.S. housing market conditions, looks at the potential for a housing bubble and digs into whether hot markets are overheating.
  • Dr. DeFranco will host two webinars discussing housing market conditions and the details of Arch MI’s latest Housing Review on Thursday, October 26, and Friday, October 27, 2017. Registration is free at archmi.com/hammr.
  • Detailed and interactive regional graphs and maps showing home prices and estimates of over-/undervaluation are also available at archmi.com/hammr.

The latest issue shows the modeled probability of home price declines for every state and the 50 metros with the largest populations. At the state level, the risk of home price reductions remains concentrated in energy-extraction regions. At the metro level, the highest risk scores show an approximate one in three chance of lower prices in two years, led by Fort Lauderdale-Pompano Beach-Deerfield Beach, Florida (35 percent) and Nashville-Davidson-Murfreesboro-Franklin, Tennessee (35 percent). The highest risk scores are elevated primarily due to home prices growing faster than incomes, which is hurting affordability.

Fall 2017 Arch MI Risk Index®

States with the Highest Risk Index Values

Highest Risk States
Risk Rank   State   Latest Risk Index   1-Year Change
Moderate   Alaska   39   14
Moderate   North Dakota   33   -14
Moderate   Wyoming   31   -13
Moderate   West Virginia   26   -5
Low   Oklahoma   16   -11
Low   Louisiana   15   -3
Low   New Mexico   11   -9
Minimal   Mississippi   10   2
Minimal   Connecticut   8   6
Minimal   Texas   8   -1

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, a leading provider of private mortgage insurance and wholly owned subsidiary of Arch Capital Group Ltd. 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 weighs 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 Federal Housing Finance Agency’s All-Transactions Regional House Price Index. Current 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.


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 and United Guaranty Residential Insurance 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 and HaMMR is a service mark of Arch Capital Group (U.S.) Ltd. or its affiliates.


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.


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


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