January 10, 2019

Arch MI’s New Housing and Mortgage Market Review Makes 2019 Predictions on Pricing, Affordability and Where to Find the Hottest Markets

The Risk of Price Declines in 2019 and 2020 Remains Low, but Is
Rising in the West, According to the Quarterly Arch MI Risk Index

GREENSBORO, N.C.–()–Expect home prices to increase in 2019, especially in the urban
neighborhoods and “magnet cities” favored by Millennials, according to
the Winter edition of The Housing and Mortgage Market Review
(HaMMR), released today by Arch Mortgage Insurance Company (“Arch MI”).
The national average home price is likely to increase 2–5 percent next
year, worsening overall affordability, although some slow-growing
markets will likely see price declines.

“The housing market has gone from a full boil to a slow simmer, but it’s
nowhere near ice-cold”

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According to the HaMMR report, there’s little chance of a housing bust
because the typical warning signs of a widespread housing bubble are not

“The housing market has gone from a full boil to a slow simmer, but it’s
nowhere near ice-cold,” said Dr. Ralph G. DeFranco, Global Chief
Economist for Arch Capital Services Inc. “An ongoing housing shortage,
together with a strong job market, means home prices will increase in
many markets nationally. There will be a rebalancing with limited and
short-lived price declines in some regions where prices shot up sharply
over the past few years, and in weaker housing markets, such as
industrial centers and energy-producing states.”

The new report also presents DeFranco’s top five predictions for 2019 on
pricing, credit risk and affordability, as well as a 2018 market recap
and surprising new data on the impact of the housing bust on Millennial
home ownership rates.

The quarterly Arch MI Risk Index, a statistical model based on nine
indicators of the health of local housing markets, suggests the
probability of home prices being lower in two years remains unusually
low at 6 percent. Every state is expected to have positive home price
growth over the next two years, continuing recent trends.

The states with the highest risk of having lower home prices in two
years are Alaska at 27 percent, followed by West Virginia and
Connecticut, both at 19 percent. Among larger metros, Houston, Texas (20
percent), and San Antonio, Texas (20 percent), are the riskiest because
their home prices are far higher than expected compared to the
historical relationship between prices and incomes. Among the 10 cities
most at risk of price declines, Portland, Oregon, saw the largest
increase in risk because home prices there are much higher than
expected, based on historical trends.

Commentary resources:

  • The Housing and Mortgage Market Review is posted at archmi.com/hammr.
    The Winter 2019 edition summarizes current U.S. housing market
    conditions and focuses on trends in Millennials’ home ownership rates.
  • Dr. DeFranco will host a Housing Update webinar discussing market
    conditions and the details of HaMMR on Feb. 6 and 7. Registration is
    free at archmi.com/hammr.
  • Detailed and interactive regional graphs and maps showing home prices
    are also available at archmi.com/hammr
    by clicking the View Our HPI Charts and Maps link.
Winter 2019 Arch MI Risk Index
States with the Highest Risk Index Values (Probability of Price
Decline Times 100)
State       Risk Index       Change in Quarter
Alaska       27       1
West Virginia       19       0
Connecticut       19       1
North Dakota       18       1
Texas       18       0
Wyoming       14       -1
Colorado       13       0
Oklahoma       12       1
Mississippi       12       1
Idaho       12       0

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 Greensboro, North Carolina, Arch MI’s mission is to
protect lenders against credit risk, while extending the possibility of
responsible home ownership 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 and 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

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.

NC 27401 | ARCHMI.COM MCUS-B0853I-0119

© 2019 Arch Mortgage Insurance Company. All Rights Reserved. Arch MI is
a marketing term for Arch Mortgage Insurance Company and United Guaranty
Residential Insurance Company. The Housing and Mortgage Market Review and
Arch MI Risk Index are registered marks of Arch Capital Group (U.S.) or
its affiliates. HaMMR is a service mark of Arch Capital Group (U.S.) or
its affiliates.


Arch Capital Services Inc.
Greg Hare, 336-333-0416

Method Communications
Margaret Bonaparte, 415-891-4914