Arch MI Releases Spring 2015 Edition of Its Housing and Mortgage Market Review and the Latest Arch MI Risk IndexSM

Arch MI Risk IndexSM Continues To Forecast Low Probability Of Home Price Declines, But Indicates Highest Risk Remains In Oil-Producing States

WALNUT CREEK, Calif.--()--Arch Mortgage Insurance Company (“Arch MI”), a leading provider of private mortgage insurance and a wholly owned subsidiary of Arch Capital Group Ltd., today released the Spring 2015 Edition of its Housing and Mortgage Market Review, which contains the latest Arch MI Risk Index. The state- and city-level risk indices analyze the likelihood that home prices in a state or Metropolitan Statistical Area (“MSA”) will decrease over the course of two years, based on recent economic and housing market data.

“Our data shows that states with high levels of employment in the oil extraction and related industries continue to have elevated risk scores”

“Our data shows that states with high levels of employment in the oil extraction and related industries continue to have elevated risk scores,” said Dr. Ralph DeFranco, Senior Director of Risk Analytics and Pricing at Arch MI. “The Spring Edition of Arch MI’s Housing and Mortgage Market Review shows that, while the national average risk score remains stable and at a low level of 8%, North Dakota, Oklahoma and Texas continue to have elevated risks due to their exposure to the oil sector.”

Oklahoma and Texas rose to moderate-risk from the low-risk category, joining North Dakota as their economies cool due to the industry-wide drop in oil and gas exploration. These states had identical risk scores of 33%, increasing from 27% and 24%, respectively. Also moving up in the risk rankings, Mississippi’s score rose from 7% to 18% as the result of an increase in mortgage delinquencies. This has shifted the state into the low-risk from the minimal-risk category. Moving down from moderate-risk to low-risk in the rankings was Louisiana, as its risk score declined from 35% to 27%. This positive shift is attributable to increases in home prices and the decline of loans in foreclosure.

Dallas-Plano-Irving and San Antonio-New Braunfels, Texas, were the two most risky of the nation’s 50 largest MSAs. With a 42% probability of home price declines within the next two years, these two MSAs rank in the moderate-risk category. Home prices in this region are well above their historic long-term trends (based on income), so affordability remains a concern. Employment in these regions is currently solid, however the effects of the drop in oil prices are just starting to emerge. Also moving up into the moderate-risk category were two additional Texas MSAs, including Houston-Sugar Land-Baytown and Austin-Round Rock-San Marcos, primarily due to relatively high home prices compared to income.

     
Spring 2015 Arch MI Risk Index
 
10 Riskiest States and 10 Riskiest Large MSAs
   
Highest Risk States Highest Risk in the 50 Largest MSAs

Risk
Rank

  State  

Risk
Index

  Affordability

Index*

Risk

Rank

  MSA  

Risk
Index

  Affordability

Index*

Moderate   North Dakota   38   231 Moderate   Dallas-Plano-Irving, TX   42   183
Moderate   Oklahoma   33   220 Moderate  

San Antonio-New
Braunfels, TX

  42   183
Moderate   Texas   33   200 Moderate  

Houston-Sugar Land-
Baytown, TX

  38   182
Low   Louisiana   27   198 Moderate  

West Palm Beach-
Boca Raton-Boynton
Beach, FL

  35   129
Low   Alaska   20   181 Moderate  

Austin-Round Rock-
San Marcos, TX

  32   169
Low   Mississippi   18   208 Low  

Santa Ana-Anaheim-
Irvine, CA

  27   70
Low   New Mexico   18   167 Low  

Fort Worth-
Arlington, TX

  26   241
Low   Wyoming   18   263 Low  

Denver-Aurora-
Broomfield, CO

  19   135
Low   Colorado   13   157 Low  

Fort Lauderdale-
Pompano Beach-
Deerfield Beach, FL

  18   133
Minimal   Florida   9   171 Low  

San Francisco-San
Mateo-Redwood
City, CA

  15   56
           

More details are available in the Housing & Mortgage Market Review – Spring 2015 edition, available at archmi.com. *The affordability index comes from the National Association of Realtors®.

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 seasonally 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 384 largest metropolitan statistical areas (MSAs) will be lower in two years, times 100 (for example, a score of 25 indicates a 25 percent chance that home prices 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 is updated after each quarterly release of the FHFA All-Transactions Regional Housing Price Index (HPI).

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 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 archmi.com.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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.

Contacts

Arch Mortgage Insurance Company
Bill Horning, 925-658-6193
or
Weber Shandwick
Sarah Payne, 212-445-8414

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