New Report Finds Low Risk of Nationwide Home Price Declines, with “Energy Patch” States Most at Risk

Arch MI Winter 2016 Housing and Mortgage Market Review and Arch MI Risk Index® Continues to Forecast a Strong Housing Market

WALNUT CREEK, Calif.--()--The likelihood of home price declines across the United States over the next two years remains low at 6 percent, according to the Arch Mortgage Insurance Company (“Arch MI”) Winter 2016 Housing and Mortgage Market Review, which contains the latest Arch MI Risk Index® model results. Despite the continued low national risk, “Energy Patch” states – coal-, oil- or natural gas- producing states – are significantly more at risk as they continue to experience the fallout from large drops in energy prices.

“Nationwide, the housing market is likely to strengthen over the coming year in spite of economic headwinds from a strong dollar and expected gradual rate increases by the Federal Reserve”

The report, released today by Arch MI, a leading provider of private mortgage insurance and wholly owned subsidiary of Arch Capital Group Ltd., models the state- and metro-level risk indices to predict the likelihood that home prices in a region will decrease over the next two years, based on recent economic and housing market data.

“Nationwide, the housing market is likely to strengthen over the coming year in spite of economic headwinds from a strong dollar and expected gradual rate increases by the Federal Reserve,” said Dr. Ralph G. DeFranco, Senior Director of Risk Analytics and Pricing at Arch MI. ”Despite this forecast, ’Energy Patch’ states such as North Dakota, Wyoming, West Virginia and Alaska are at greatest risk of experiencing declining prices as their economies continue to slow due to continued fallout from the large drop in coal, oil and natural gas prices seen over the last year. In addition, Texas has the riskiest MSA’s due to oil price declines.”

“Apart from these few exceptions, national prices should rise faster than inflation over the coming years due to a number of strong fundamentals, including: a shortage of homes for sale or rent, better than average affordability, and continued job growth of 2 to 3 million jobs a year.”

On a state level, North Dakota, Wyoming, Alaska, West Virginia and New Mexico have the highest Arch MI Risk Index values. Total employment continues to weaken in these states, even as home prices continue to rise. Although conditions will likely be weak for several more years, the odds still favor positive (but weak) home price growth for most of the region.

  • North Dakota has the highest Arch MI Risk Index value of 46 (46 percent change of any sized price decline), primarily due to the 2.9 percent decline in employment over the past year. North Dakota’s home prices are estimated to be overvalued by 20 percent in the aftermath of the oil fracking boom and bust.
  • Wyoming has an Arch MI Risk Index value of 37. The state is the nation’s largest coal producer and its mining and gas drilling employment has fallen to 10-year lows.
  • Alaska’s Arch MI Risk Index value came in at 33. The state’s home price growth is decelerating as low energy prices set back the most oil-dependent economy in the nation.
  • West Virginia has an Arch MI Risk Index value of 33 and registered the nation’s second largest year-over-year decline in total employment (-1.8 percent). The state’s coal prices and employment are hurt by competition from cheap natural gas.
  • New Mexico registered a score of 31 on the Arch MI Risk Index due to the potential risk of recession due to job losses in government and energy.
  • Texas has the top five riskiest MSA’s with between 26-36% chance of house price declines in those regions.

Within the Arch MI Risk Index values for the 50 most populous Metropolitan Statistical Areas (“MSAs”), only one MSA registered in the elevated-risk category: Houston-The Woodlands-Sugarland, TX (36). Four other Texas MSAs are within the “moderate risk” category with Risk Index scores of 26, including: Austin-Round Rock, Dallas-Plano-Irving, Fort Worth-Arlington and San Antonio-New Braunfels. Home prices in all of four of these MSAs are well above their historic long-term trends – by 32, 24, 15 and 19 percent respectively, compared to their historical relationships to incomes.


Fall 2015 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   46   0 Elevated   Houston-The Woodlands-Sugar Land, TX   36   7
Elevated   Wyoming   37   0 Moderate   Austin-Round Rock, TX   26   9
Elevated   West Virginia   33   -1 Moderate   Dallas-Plano-Irving, TX   26   5
Elevated   Alaska   33   -1 Moderate   Fort Worth-Arlington, TX   26   2
Elevated   New Mexico   31   -1 Moderate   San Antonio-New Braunfels, TX   26   3
Moderate   Oklahoma   28   0 Low   Anaheim-Santa Ana-Irvine, CA   6   0
Moderate   Louisiana   28   -5 Low   West Palm Beach-Boca Raton-Delray Beach, FL   4   2
Moderate   Texas   26   4 Low   New York-Jersey City-White Plains, NY-NJ   3   -4
Low   Mississippi   8   -4 Low   San Diego-Carlsbad, CA   2   -1
Low   Hawaii   3   -2 Low   Atlanta-Sandy Springs-Roswell, GA   2   0

Dr. DeFranco will be hosting two webinars to discuss the implications of the latest data during the week of January 11th, 2016. Registration is freely available at, under the Resources tab.

More details are available in the Housing & Mortgage Market Review – Winter 2016 edition, available at under the News & Resources tab.

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.


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


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 Mortgage Insurance Company
Bill Horning, 925-658-6193
Weber Shandwick
Robert Howard, 202-585-2732

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