Report Finds U.S. Housing Affordability Declined by 5 Percent in Q1 and Could Worsen Another 10–15 Percent by Year-End 2018
Arch MI Spring 2018 Housing and
With property location and interest rates the key factors, the cities where affordability is expected to decline the fastest include
For homeowners, there’s good news in that home values are expected to continue to appreciate. According to the latest quarterly Arch MI Risk Index, a statistical model based on leading housing market indicators, the average probability of experiencing home price declines remains unusually low, at 5 percent. The shortage of homes for sale means that the likelihood of local housing busts, or even mild price declines, over the next two years is near historic lows. This reflects a broad array of favorable fundamentals, such as a healthy job market, relatively low interest rates and home prices in line with incomes compared to their historical norms, at least in the majority of American cities.
“If mortgage rates and home prices continue to rise as expected, affordability will get hammered by year-end as demand continues to outstrip supply,” said Dr.
The latest HaMMR also discusses the impact of tariffs on the housing market. While it will lead to slightly higher construction costs and a shifting of the relative economics of making steel, aluminum and final consumer goods inside and outside the
Commentary resources:
- The Housing and Mortgage Market Review (HaMMR) is posted at archmi.com/hammr. The Spring 2018 edition summarizes current
U.S. housing market conditions and the effects of the latest tariffs on the housing market. -
Dr. DeFranco will host Housing Update webinars discussing market conditions and the details of HaMMR onApril 19 and 20, 2018. 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 the HPI Charts link.
At the state level,
Spring 2018 Arch MI Risk Index
States with the Highest Risk Index Values (Probability of Price Decline Times 100)
State | Risk Index |
Change Since |
||||
|
28 | -3 | ||||
|
27 | -11 | ||||
|
25 | -12 | ||||
|
24 | 3 | ||||
|
15 | 12 | ||||
|
14 | 6 | ||||
|
14 | -7 | ||||
|
14 | 7 | ||||
|
10 | 0 | ||||
|
10 | -5 | ||||
About Arch MI’s Housing and Mortgage Market Review, Risk Index and Fundamental HVI
The Housing and Mortgage Market Review, which presents Arch MI Risk Index results, is published quarterly by
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 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 estimates the likelihood of seeing negative home prices and does not indicate the size of any declines. The latest HaMMR, Risk Index, local housing percent over-/undervaluation can be reviewed at archmi.com/hammr.
Fundamental HVI is a statistical model based on the historical relationship between incomes and home prices.
Detailed, interactive regional graphs and maps are available on Arch MI’s website, showing relative over- or undervalued home prices at archmi.com/HPI-Charts-and-Maps.
About
Arch Capital Group Ltd.’s
Cautionary Note Regarding Forward-Looking Statements
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