GREENSBORO, N.C.--(BUSINESS WIRE)--Millennials, a key driver of the housing market, are the focus of a special edition of The Housing and Mortgage Market Review (HaMMR) released today by Arch Mortgage Insurance Company (“Arch MI”). With Millennial home ownership on the rise, the report ranks 25 affordable cities with solid growth, examines how the age distribution points to increased housing demand over the next decade and lists key facts these homebuyers need to know.
The report also concludes that, because the supply of homes trails the demand by as much as 2 million units, prices are likely to continue rising.
“It’s important for potential buyers to understand that many markets remain reasonably affordable by historic norms, but this may not last much longer since the consensus forecast is for prices and interest rates to continue increasing,” said Dr. Ralph G. DeFranco, Global Chief Economist for Arch Capital Services Inc. “The good news is there are many cities with vibrant job markets and homes that are more affordable than the nation as a whole. One factor that needlessly hinders some potential first-time buyers is the incorrect idea that you need a 20 percent down payment when, in reality, most first-time homebuyers put down between 3 and 10 percent. Unfortunately, delaying a purchase decision in the current market will likely mean paying more later.”
Fall 2018 HaMMR
Top Five Most Affordable Cities with Both Strong Labor and Housing Markets
All 25 of the cities listed in the report have better overall affordability than the U.S. overall, which currently requires 31 percent of the median household’s income to cover mortgage payments on a median-priced home.
The quarterly Arch MI Risk Index, a statistical model based on nine indicators of the health of local housing markets, suggests the probability of home prices being lower in two years is unusually low at 6 percent, up 1 percent from the previous quarter due to worsening affordability, particularly in Western states. Every state is expected to have positive home price growth over the next two years, continuing recent trends.
The states with the highest risk of having lower home prices in two years are Alaska at 26 percent, followed by West Virginia at 19 percent. Among larger metros, Houston, Texas (22 percent) and Denver, Colorado (18 percent) are the riskiest because their home prices are far higher than expected compared to the historical relationship between prices and incomes.
Alaska, West Virginia and Texas have the highest probability of home price declines over the next two years due to the lingering effects of weakness in the energy-extraction sector. However, risks in these areas are trending down in tandem with higher oil prices.
Fall 2018 Arch MI Risk Index
States with the Highest Risk Index Values (Probability of Price Decline Times 100)
|State||Risk Index||Change in Quarter|
- The Housing and Mortgage Market Review is posted at archmi.com/hammr. The Fall 2018 edition summarizes current U.S. housing market conditions and focuses on Millennials.
- Dr. DeFranco will host a Housing Update webinar discussing market conditions and the details of HaMMR on Oct. 23 and 24. 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 by clicking on the HPI Charts link.
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, Arch MI's mission is to protect lenders against credit risk, while extending the possibility of responsible home ownership 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.
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© 2018 Arch Mortgage Insurance Company. All Rights Reserved. Arch MI is a marketing term for Arch Mortgage Insurance Company and United Guaranty Residential Insurance Company. 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.