New Report Finds Home Prices Likely to Continue Rising, with Possible Exception of a Few Energy-Extraction Areas

Arch MI Spring 2016 Housing and Mortgage Market Review® Forecasts Strong Housing Market in Most Metros

WALNUT CREEK, Calif.--()--The likelihood of home price declines across the United States over the next two years remains low at 5 percent, according to Spring 2016 Housing and Mortgage Market Review published by Arch Mortgage Insurance Company (“Arch MI”), which contains the latest Arch MI Risk Index® model results. Despite the low overall risk of home price declines, some areas in the “Energy Patch” (coal-, oil- or natural gas- producing) states remain at heightened risk and may experience slower than normal economic and home price growth.

“Apart from a subset of energy extraction states, home prices should rise faster than inflation, thanks to strong fundamentals”

The report, released today by Arch MI, 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 Spring 2016 edition also features a special report on the potential impact of rising mortgage interest rates on home sales and prices. The research examines prior periods of rising mortgage rates and the resulting effect on the Home Price Index (HPI) and the change in home sales. Arch MI has also added interactive regional graphs and maps to their website showing relative over- or undervalued home prices.

“Apart from a subset of energy extraction states, home prices should rise faster than inflation, thanks to strong fundamentals,” said Dr. Ralph G. DeFranco, Arch MI’s Chief Economist. ”Positives include strong affordability, home prices generally below their historical relationship with incomes, U.S. job growth of more than 2 million jobs a year, and a low levels of construction relative to growing demand.”

On a state level, Alaska, North Dakota, Wyoming and West Virginia are currently most at risk of home prices declines. Total employment continues to weaken in these states, even as home prices continue to rise. The Energy Patch will experience slower than normal economic and home price growth, and a few areas may see outright home price declines.

  • North Dakota has the highest Arch MI Risk Index value at 47 (47 percent change of any-sized price decline over the next two years), primarily due to a 4 percent drop in year-over-year total employment, the largest decline in the nation. North Dakota’s home prices are estimated to be overvalued by 22 percent relative to historic norms, likely due to the once-roaring oil fracking boom.
  • Wyoming has an Arch MI Risk Index value of 40. The state is the nation’s largest coal producer and, as recently as late 2014, mining jobs represented 10% of the state’s total employment. Since then, mining employment has fallen 20% and workers are now leaving the state.
  • West Virginia has an Arch MI Risk Index value of 35 and registered the nation’s second largest year-over-year decline in total employment (-1.5 percent). Housing in the state is weakening, with falling existing-home sales and an uptick in foreclosures.
  • Alaska’s Arch MI Risk Index value came in at 31. Low energy prices have pushed the nation’s most oil-dependent economy into recession and government layoffs. In spite of this, home prices and sales have held up well to date.
  • Louisiana has an Arch MI Risk Index Score of 30. While the unemployment rate fell to 5.8 percent, the total employment rate fell 0.3 percent. Additionally, home sales have fallen precipitously.
  • New Mexico registered a score of 30 on the Arch MI Risk Index due to the potential risk of recession caused by government- and energy-related job losses.
  • Oklahoma posted an Arch MI Risk Index Score of 24. The state is less diversified than neighboring Texas and total employment is falling slightly. Home price growth is below national averages, but accelerated in the fourth quarter of 2015.
  • Texas registers the lowest risk of the Energy Patch states with an Arch MI Risk Index Score of 19, thanks to a more diversified economy. Employment in Texas remains positive, but has weakened in recent months. Home prices continue to grow faster than the national average, leading to heightened risk scores for several Texas communities.

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 (39). Fort-Worth-Arlington, Texas, registered within the “moderate risk” category with a Risk Index score of 19. Three other Texas MSAs fell within the “low risk” category, including San Antonio-New Braunfels, Austin-Round Rock, Dallas-Plano-Irving.


Spring 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



    47     1 Elevated    

Land, TX

    39     3
Elevated     Wyoming     40     3 Moderate    

Fort Worth-
Arlington, TX

    19     -7


    35     2 Low    

San Antonio, New
Braunfels, TX

    9     -17
Elevated     Alaska     31     -2 Low    

Austin-Round Rock,

    6     -20
Moderate     Louisiana     30     2 Low    


    5     -21
Moderate     New Mexico     30     -1 Low    

Scottsdale, AZ

    4     2
Moderate     Oklahoma     24     -4 Low    

West Palm Beach-
Boca Raton-Delray
Beach, FL

    3     -1
Moderate     Texas     19     -7 Low    

Anaheim-Santa Ana-
Irvine, CA

    2     -4
Low     Mississippi     9     1 Low    

Springs-Roswell, GA

    2     0
Low     Arizona     3     1 Low    

Towson, MD

    2     0

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

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

Interactive HPI Charts and Maps

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

Recent Stories

RSS feed for Arch Mortgage Insurance Company