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

WALNUT CREEK, Calif.–(BUSINESS WIRE)–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
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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Arch Mortgage Insurance Company
Bill Horning, 925-658-6193
Ramona Radlingshafer, 415-849-1322