Housing and Mortgage Market Revie · prices in two years, led by Fort Lauderdale-Pompano...

Housing and MortgageMarket ReviewFall 2017

Is a Housing Bubble Forming in the US? (Page 1)

Home Prices Not as High as They Seem (Page 4)

Are America’s Hottest Housing Markets Overheating? (Page 6)

Arch MI State-Level Risk Index (Page 8)

Housing and Mortgage Market Indicators (Page 10)

Arch MI Risk Index for the 50 Largest MSAs (Page 18)

CREATED BYRalph DeFranco, Ph.D. Global Chief Economist

Mortgage Services Arch Capital Services Inc.

Manhong Feng, Ph.D. Senior Economist Mortgage Services

Arch Capital Services Inc.

Marisa Rawling Senior Marketing

Communications Manager Arch Mortgage Insurance Company

Henry Nguyen Senior Graphic Designer

Arch Mortgage Insurance Company

IN THIS ISSUE

Is a Housing Bubble Forming in the US?Market Research Points to No. Is a Housing Bubble Forming in the US?Market Research Points to No. Anyone waiting for home prices to fall before buying is likely to be disappointed. The hottest markets are being propelled by job growth that is increasing faster than the new supply of homes and that isn’t likely to change anytime soon.

Housing markets across the nation remain healthy and

are projected to stay that way through 2018 at least.

The Arch MI Risk Index,® a statistical model based on recent housing market indicators, suggests that the average of probable home price declines in America’s 401 largest cities remains unusually low at 4 percent. This reflects broad-based favorable fundamentals, such as a tightening job market, relatively

low interest rates, a low number of homes for sale and an overall housing shortage.

The Arch MI Risk Index estimates the probability that home prices will be lower in two years, times 100. The higher the Risk Index value, the more likely an area is to experience slower than normal economic and home price growth, and the more likely it is to see home price declines.The Arch MI Risk Index uses a statistical model based on regional factors such as unemployment rates, affordability, net migration, housing starts, the percentage of delinquent mortgages, the difference between actual and estimated fundamental home prices (based on income). We make manual adjustments for unmodeled factors, such as energy prices. Risk Index values for 401 cities are available on the Risk Index link at archmi.com/hammr.

http://www.archmi.com/hammr

2 | Arch Mortgage Insurance Company

Housing and Mortgage Market Review

Latest Arch MI Risk Index

Overall, risk remained concentrated in energy-extraction

regions. In the most recent quarter, we saw some

improvement in North Dakota and Oklahoma thanks to

a gradual recovery of energy prices, but a worsening

of risk in Alaska due to continued weak employment,

primarily in the energy and government sectors. Alaska

has the highest likelihood of seeing house price declines

(39 percent), followed by North Dakota (33 percent) and

Wyoming (31 percent).

Overall, risk remains low in the top 50 metros (pages 18-19).

Of the 50 metros with the largest populations, the highest

risk scores indicate about a one in three chance of lower

prices in two years, led by Fort Lauderdale-Pompano

Beach-Deerfield Beach, Florida (35 percent) and Nashville-

Davidson--Murfreesboro--Franklin, Tennessee (35 percent).

This was mainly due to home prices growing faster than

incomes, which is hurting affordability.

Arch Mortgage Insurance Company | 3

States With the Highest Risk Index Values

RI 2017Q2 Change in Qtr.

ALASKANORTHDAKOTA WYOMING

WEST VIRGINIA OKLAHOMA LOUISIANA

NEW MEXICO MISSISSIPPI

RI 2017Q2 39 33 31 26 16 15 11 10

Change in Qtr. 6 -5 1 -1 -4 -2 -1 0

5 SUMMARY OF CURRENT CONDITIONS DRIVERS OF CHANGE FROM PRIOR QUARTER

Alaska In recession. Oil production has been falling since the early 1990s. No end in sight for the downturn in employment, with the highest unemployment rate of any state.

Weakening labor market.

North Dakota Oil production and agriculture are pulling the state out of recession.

Steady growth in employment.

Wyoming In recession due to 20 percent drop in mining/drilling employment. Population growth is negative and home price growth is the second lowest in the nation.

Continued tepid employment growth.

West Virginia Energy and manufacturing remain weak. Labor market seems to have bottomed out.

Oklahoma Economy continues to recover. Growth in home prices accelerated in more recent quarter.

Employment appears to improve.

RISKIEST STATES



Home Prices Not as High as They Seem

It is being widely reported that overall U.S. home prices

have recovered from the crash and are hitting new all-time

highs. While technically true, a far better way to compare

prices over time is to first adjust the data for inflation.

Based on today’s purchasing power of the dollar, national

home prices remain 10 percent below their prior peak (see

the chart on the opposite page). While inflation is easy to

ignore in the short term, since it has been running at under

2.0 percent a year, over longer horizons the steady erosion

in value adds up. Overall, prices of a broad selection of

consumer goods now cost 20 percent more than they did

in 2007 (based on the Consumer Price Index).

“Real HPI” is a far better way to compare home prices

over time than the commonly reported nominal House

Price Index (HPI) since it accounts for the fact that one

dollar today doesn’t buy as much as it once did. We all

suffer to some extent from what economists call “price

illusion,” which is the tendency to think in nominal (the

face value of money) values, rather than in real terms,

making comparisons difficult. Nominal home price growth

is also important, since it matters for things like the current

home owner’s ability to refinance and people’s tendency

to delay selling until prices recover to at least the level of

what they originally paid for their home.

While home prices are increasing in every state, the

recovery has been uneven, with 14 states still below their

prior peaks. A map on page 12 shows the cumulative

(nominal) change in home prices for each state compared

to their prior peaks during 2005-2008 (which varies by

state). Of the 401 MSAs we studied, 46 percent are still

below their prior (nominal) peak. On the flip side, about

10 percent of U.S. metros are red-hot, with prices 20 percent

or higher than their prior peak. We are continuing to see

the majority of job growth occurring in the largest and most

globally integrated cities, particularly those with world-class

universities and/or a large base of existing high-tech firms,

with slower growth in many, but not all, smaller areas.

”Hot” cities are becoming denser due to revitalized city

centers, while some rural areas are becoming even more

rural as young people move for work or leave for college

and don’t return.

The map on page 12 shows the cumulative (nominal)

change in home prices for each state compared to their

prior peaks during 2005-2008. Home prices have increased

in every state, with substantial variation reflecting local

supply and demand conditions. Prices have been rising

the most in Colorado, Idaho and the Great Northwest;

areas such as New England and some energy-extraction

states (Alaska, Louisiana, West Virginia and Wyoming) are

growing more slowly. Home prices have been growing

the fastest in the lower-priced entry home market, due to

limited construction at the lower end and fewer people

”moving up” to more expensive homes than in the past.

Regional Notes

� Apart from Boston, the Northeast has been relatively

weak. Employment growth has been slow due to

low population growth and a limited supply of new

workers. This region is the most exposed to European

economic weakness but fortunately, overseas growth

is accelerating.

� Illinois and Connecticut are not in recession but suffer

from out-migration and corrosive fiscal problems.

� California remains a national economic growth leader,

but growth is slowing in high-wage industries and tech-

startup valuations appear stretched.

� Florida will remain the best economic performer in

the South for at least another year, led by tourism,

residential and public construction. The state continues

to set tourism records, with 113 million visitors spending

$109 billion last year. In-migration has picked up.


Adjusted for Inflation, Home Prices Are Cheaper Now Than in 2007

FHFA All-Transactions Nominal House Price Index (1980Q1=100, SA) FHFA-All Transactions Real House Price Index (1980Q1=100, SA)

‘17Q2 Nominal HPI was 6% higher than the prior peak.

‘17Q2 Real HPI was 10% lower than the prior peak.

SA stands for Seasonally Adjusted.



Are America’s Hottest Housing Markets Overheating?Several housing markets are experiencing home price growth rocketing upwards by 10 percent or more a year. What is going on here and has it gone too far?

The main drivers are strong job and population growth and a shortage of starter homes for sale, with no clear end in sight. While it’s not directly observable whether prices have gone too high, since that depends on the intrinsic value of housing, we have developed two measures that suggest caution is more warranted in some markets than in others.

The following table shows the 10 hottest markets (as measured by the Federal Home Finance Agency (FHFA) All-Transactions Home Price Index (HPI)) among America’s 100 largest metros. Home price growth accelerated in these cities from the year before, with the exceptions of Denver and Portland. The growth in the total number of jobs in these cities over the past year exceeded the national average, but just barely so in Sacramento. The unemployment rate for Denver is only 2.3 percent, 2.6 percent in Nashville (See pages 18-19) and is below the national average in all of these cities except for the two cities in California.

AMERICA’S Hottest Housing Markets

HPI GROWTH

PAST YEAR

POPULATION 1-YR. % CHANGE

EMPLOYMENT 1-YR. % CHANGE

% OVER-/ UNDER- VALUED

CURRENT MEDIAN

DTI

MEDIAN DTI VS. AVG.

1987-2004

United States 6.4% 0.7% 1.5% 2% 25% -5%

Nashville--Davidson--Murfreesboro--Franklin, TN 10.3% 2.0% 2.5% 17% 23% -2%

Grand Rapids-Wyoming, MI 10.3% 0.9% 2.1% 4% 17% -2%

Sacramento--Roseville--Arden-Arcade, CA 10.4% 0.6% 1.5% 5% 30% -1%

Stockton-Lodi, CA 10.6% 0.8% 1.6% 2% 34% 3%

Portland-Vancouver-Hillsboro, OR-WA 10.8% 2.1% 2.5% 16% 32% 5%

Tampa-St. Petersburg-Clearwater, FL 11.3% 1.7% 3.1% 17% 24% 0%

Denver-Aurora-Lakewood, CO 11.3% 1.3% 1.7% 27% 32% 4%

Dallas-Plano-Irving, TX 11.6% 2.0% 3.1% 36% 25% 0%

Fort Worth-Arlington, TX 11.7% 2.0% 2.9% 30% 19% -2%

Orlando-Kissimmee-Sanford, FL 12.5% 3.1% 3.3% 11% 26% 2%

Boise City, ID 12.5% 2.8% 3.7% 23% 23% 0%

Tacoma-Lakewood, WA 12.8% 2.0% 2.6% 9% 28% 2%

Seattle-Bellevue-Everett, WA 14.0% 2.0% 2.1% 13% 33% 1%


The supply of homes for sale is very low. The average

number of days homes were on the market (available

for most cities on the National Association of Realtors®

(NAR) website) ranged from 37 days in Stockton to

73 days for Orlando. The U.S. average was a near-record

low at 69 days.

The first valuation measure (Percentage Over-/Undervalued

in the table) compares home prices to what a regression

model expects, given the historical relationship between

home prices and incomes since 1980. It suggests that

Denver, Boise and Dallas/Fort Worth are very expensive

relative to their past, while Sacramento, Stockton and

Grand Rapids are near fair value (or their historical

norms). We use per-capita income because (a) over

long periods of time prices tend to track incomes and (b)

prices cannot grow faster than incomes forever since that

would eventually leave no money left for anything but

housing. This measure is more a long-run “through the

cycle” measure since it doesn’t account for changes in

interest rates (with the advantage of not being affected by

the whims of the financial markets). Unfortunately, large

deviations from trend are common (particularly in space-

constrained areas) either because fundamentals undergo a

permanent change or because it takes many years before

supply and demand come into balance. This measure is

a powerful predictor in the Arch MI Risk Index, along with

employment and economic growth.

Our second valuation measure (introduced in the Winter

2017 HaMMR) is the “Median Debt-to-Income Ratio (DTI)”:

the amount of pre-tax income the median household would

need to cover the payment on the median house.

Note this is not based on actual loan DTI ratios and

doesn’t include non-mortgage debt payments, but does

vary with interest rates. Comparing today’s home values

to a period we considered “normal” (from 1987 through

2004) finds that Denver, Portland and Stockton are the

most expensive compared to their pasts, while the other

cities look more reasonable. However, none of the cities

in the table were as much below “normal” historical

averages as the United States overall.

Comparisons to historical valuations are more a starting

point than a definitive answer for analyzing housing

market risk, since many other supply and demand

factors matter as well. Take Denver or Dallas for

instance. Both have become far more diversified in the

types of employment over the past 20 years and are

experiencing large inflows of people from higher-cost

areas such as California. Texas’ business-friendly and

low tax policies are attracting large inflows of businesses.

Given the positive fundamentals, prices are more likely

to continue going up rather than fall back to past levels

of affordability. Some of these positive economic factors

are reflected in their low Risk Index values in spite of their

being expensive relative to their past. Thus, higher values

relative to the past don’t automatically imply a crash

is coming, but it does suggest that if a large economic

shock occurs, it could result in larger price declines.

In short, the current strength in these hot markets appears

to be due to broad-based economic growth and not

a bubble.



STATE (Sorted by Risk Ranking, then by Alphabet)

ARCH MI RISK INDEX ANNUAL HOME PRICE % CHANGE (FHFA HPI) UNEMPLOYMENT RATE GROSS STATE PRODUCT SINGLE-FAMILY

HOUSING STARTS POPULATION

RISK RANKING LATEST 1-YEAR

CHANGE LATEST 1 YEAR EARLIER VOLATILITY LATEST 1-YEAR

CHANGELONG

RUN AVG.PER CAPITA

2017Q21-YEAR % CHANGE

PER 1000 PEOPLE 2017Q2

1-YEAR % CHANGE

2017Q2 (THS.)

1-YEAR % CHANGE

Alaska Moderate 39 14 0.7 2.9 Normal 7.0 0.3 7.9 $ 68,137 2.8 1.2 29.7 745 0.5North Dakota Moderate 33 -14 2.8 3.3 Normal 2.2 -0.9 3.9 $ 68,632 3.9 3.7 -11.9 756 -0.2West Virginia Moderate 26 -5 1.4 1.1 High 4.7 -1.3 8.2 $ 39,665 6.4 1.2 -2.5 1,827 -0.2Wyoming Moderate 31 -13 1.1 3.4 Normal 4.0 -1.4 4.9 $ 64,167 5.5 2.6 9.9 589 0.6Louisiana Low 15 -3 2.8 4.6 Normal 5.3 -0.9 7.3 $ 50,104 4.1 2.7 6.6 4,695 0.3New Mexico Low 11 -9 3.6 3.1 Low 6.3 -0.5 6.8 $ 44,656 4.0 1.7 15.9 2,085 0.2Oklahoma Low 16 -11 3.9 3.0 Low 4.4 -0.6 5.2 $ 46,562 1.7 2.5 3.2 3,948 0.6Alabama Minimal 2 0 3.7 3.4 Low 4.5 -1.3 7.3 $ 41,994 3.3 2.5 1.0 4,871 0.2Arizona Minimal 4 0 8.5 7.5 Normal 5.1 -0.1 6.4 $ 43,230 3.0 3.2 20.7 7,076 2.1Arkansas Minimal 2 0 4.2 3.4 Low 3.4 -0.6 6.5 $ 40,392 0.8 2.3 -0.6 3,000 0.4California Minimal 2 0 7.9 7.5 Low 4.8 -0.6 7.3 $ 65,772 4.3 1.2 31.4 39,449 0.5Colorado Minimal 6 1 10.4 11.4 High 2.4 -1.0 5.4 $ 57,870 2.9 3.5 24.1 5,612 1.3Connecticut Minimal 8 6 1.7 0.4 Normal 5.0 -0.1 5.5 $ 73,352 3.1 0.8 -9.5 3,574 -0.1Delaware Minimal 2 0 2.3 2.6 Low 4.8 0.4 5.5 $ 73,261 2.6 5.2 -0.7 960 0.8District Of Columbia Minimal 2 0 6.7 8.8 Normal 6.4 0.4 7.7 $ 185,123 2.3 0.5 2.9 688 0.9Florida Minimal 3 1 9.7 9.8 Low 4.1 -0.8 6.3 $ 44,530 3.4 3.7 7.3 21,043 2.1Georgia Minimal 2 0 7.1 6.6 High 4.7 -0.6 6.1 $ 50,481 2.7 3.6 5.4 10,443 1.3Hawaii Minimal 2 0 6.0 6.6 Normal 2.7 -0.3 5.0 $ 58,485 2.2 1.3 52.0 1,432 0.2Idaho Minimal 4 -1 10.4 7.3 High 3.0 -0.8 6.0 $ 39,765 3.1 5.1 19.1 1,715 1.9Illinois Minimal 2 0 3.7 3.1 Low 4.8 -1.0 7.0 $ 61,514 2.6 0.8 4.4 12,798 0.0Indiana Minimal 2 0 4.9 3.4 Normal 3.1 -1.4 6.2 $ 51,243 3.9 2.2 15.4 6,655 0.3Iowa Minimal 2 0 4.3 3.5 Low 3.2 -0.5 4.6 $ 56,679 1.7 2.5 3.0 3,145 0.3Kansas Minimal 2 0 5.1 5.0 High 3.7 -0.5 4.7 $ 52,564 1.2 1.8 32.9 2,924 0.6Kentucky Minimal 2 0 5.3 4.0 Low 5.3 0.3 6.8 $ 44,104 4.4 1.7 1.0 4,449 0.3Maine Minimal 2 0 4.7 3.4 Low 3.7 -0.3 5.9 $ 44,477 2.2 2.9 -15.9 1,331 -0.1Maryland Minimal 2 0 3.7 2.8 Normal 4.0 -0.3 5.3 $ 62,592 3.7 1.9 6.5 6,034 0.3Massachusetts Minimal 2 0 6.7 5.3 Normal 4.3 0.7 5.6 $ 73,896 4.2 1.3 -9.8 6,846 0.5Michigan Minimal 2 0 7.6 5.7 Normal 3.7 -1.2 8.0 $ 48,919 3.9 1.5 24.0 9,925 0.0Minnesota Minimal 2 0 7.1 5.3 High 3.7 -0.2 4.9 $ 60,138 3.4 2.4 12.4 5,549 0.5Mississippi Minimal 10 2 2.7 3.0 Low 5.2 -0.7 7.6 $ 35,935 2.8 2.2 6.0 2,992 0.1Missouri Minimal 2 0 4.6 5.0 Low 3.8 -1.0 6.0 $ 49,220 3.0 1.9 -1.3 6,112 0.3Montana Minimal 2 0 5.0 4.2 Low 3.9 -0.2 5.8 $ 43,779 0.9 2.7 21.3 1,050 0.7Nebraska Minimal 2 0 7.2 4.2 Normal 2.8 -0.4 3.6 $ 60,201 2.6 2.8 8.3 1,920 0.7Nevada Minimal 4 1 9.4 9.7 Normal 4.8 -0.8 6.6 $ 49,343 3.7 3.6 19.0 3,003 2.2New Hampshire Minimal 2 0 5.8 4.0 Normal 2.8 -0.1 4.4 $ 57,836 3.5 2.3 -22.6 1,337 0.2New Jersey Minimal 2 0 2.8 2.8 Low 4.2 -0.9 6.4 $ 64,587 3.1 1.2 -22.9 8,957 0.1New York Minimal 2 0 4.3 3.9 Low 4.7 -0.2 6.6 $ 75,434 1.2 0.6 -14.8 19,752 0.0North Carolina Minimal 2 0 7.1 5.3 Normal 4.1 -0.8 5.8 $ 50,674 2.8 4.5 3.0 10,292 1.4Ohio Minimal 2 0 5.9 4.0 High 5.2 0.3 6.8 $ 53,480 5.0 1.4 16.5 11,621 0.1Oregon Minimal 2 0 10.0 11.7 Normal 3.8 -1.3 7.2 $ 55,198 1.5 2.4 9.3 4,160 1.6Pennsylvania Minimal 2 0 3.7 3.0 Low 5.0 -0.5 6.5 $ 56,244 4.4 1.4 -6.2 12,778 0.0Rhode Island Minimal 2 0 6.6 4.0 Normal 4.3 -1.1 6.6 $ 54,050 3.6 0.9 -7.5 1,058 0.1South Carolina Minimal 2 0 6.0 5.6 Low 3.9 -0.9 6.6 $ 42,134 2.6 5.4 0.1 5,021 1.2South Dakota Minimal 2 0 6.5 4.1 Low 3.1 0.2 3.7 $ 55,358 3.0 3.6 19.6 871 0.6Tennessee Minimal 2 0 7.5 6.6 Normal 3.4 -1.4 6.5 $ 49,053 3.4 3.7 5.4 6,707 0.8Texas Minimal 8 -1 8.5 7.9 Normal 4.3 -0.4 6.1 $ 57,556 3.5 3.9 4.0 28,316 1.6Utah Minimal 2 0 9.6 7.6 Normal 3.5 0.1 4.9 $ 50,531 4.2 4.5 21.5 3,114 2.1Vermont Minimal 2 0 1.8 1.7 Normal 3.1 -0.2 4.7 $ 49,408 2.8 1.6 -18.0 626 0.2Virginia Minimal 2 0 3.9 3.0 Normal 3.8 -0.3 4.8 $ 58,450 4.0 2.7 -3.2 8,458 0.6Washington Minimal 2 0 11.4 11.0 Normal 4.5 -1.0 7.1 $ 63,880 3.4 2.9 8.1 7,414 1.7Wisconsin Minimal 2 0 5.9 4.1 Normal 3.2 -1.0 5.6 $ 53,130 4.1 2.0 16.6 5,794 0.3

Pop. Weighted Average Minimal 4 0 5.9 5.9 Low 4.2 -0.7 5.8 $ 50,302 2.1 2.5 9.5 325,430 0.7

Arch MI State-Level Risk Index


Explanatory Notes

The Arch MI Risk Index, both at the state and

Metropolitan Statistical Area (MSA) level, estimates

the probability of home prices being lower in two

years, times 100. For example, a score of 20 means

the model estimates a 20 percent chance the FHFA

All-Transactions Regional HPI will be lower two years

from the date of the input data release. The Risk

Ranking column is a mapping of the Risk Index

values into buckets, while the next column shows the

actual Risk Index values.

Home Price Changes: The first column is the most

recent year-over-year percentage change in the

FHFA All-Transactions HPI. The next column is the

annual HPI change from a year earlier. The Volatility

column (appearing in the Arch MI Risk Index for

the 50 Largest MSAs on pages 18-19) is our ranking

based on the standard deviation of the HPI since

1985. Recent price appreciation is an indicator of

strength in the local housing market and is generally

correlated with near-term future price changes.

Unemployment Rates are seasonally adjusted

statewide or MSA-wide unemployment rates

released by the U.S. Bureau of Labor Statistics.

Gross State Product/Gross Metro Product is from

a Moody’s Analytics estimation, which is based on

gross product data released by the U.S. Bureau of

Economic Analysis.

S.F. Housing Starts are quarterly averages of

single-family housing starts data released by the

U.S. Census Bureau.

Population is from a Moody’s Analytics estimation,

which is based on population data released by the

U.S. Census Bureau.

STATE (Sorted by Risk Ranking, then by Alphabet)

ARCH MI RISK INDEX ANNUAL HOME PRICE % CHANGE (FHFA HPI) UNEMPLOYMENT RATE GROSS STATE PRODUCT SINGLE-FAMILY

HOUSING STARTS POPULATION

RISK RANKING LATEST 1-YEAR

CHANGE LATEST 1 YEAR EARLIER VOLATILITY LATEST 1-YEAR

CHANGELONG

RUN AVG.PER CAPITA

2017Q21-YEAR % CHANGE


1-YEAR % CHANGE

2017Q2 (THS.)

1-YEAR % CHANGE

Alaska Moderate 39 14 0.7 2.9 Normal 7.0 0.3 7.9 $ 68,137 2.8 1.2 29.7 745 0.5North Dakota Moderate 33 -14 2.8 3.3 Normal 2.2 -0.9 3.9 $ 68,632 3.9 3.7 -11.9 756 -0.2West Virginia Moderate 26 -5 1.4 1.1 High 4.7 -1.3 8.2 $ 39,665 6.4 1.2 -2.5 1,827 -0.2Wyoming Moderate 31 -13 1.1 3.4 Normal 4.0 -1.4 4.9 $ 64,167 5.5 2.6 9.9 589 0.6Louisiana Low 15 -3 2.8 4.6 Normal 5.3 -0.9 7.3 $ 50,104 4.1 2.7 6.6 4,695 0.3New Mexico Low 11 -9 3.6 3.1 Low 6.3 -0.5 6.8 $ 44,656 4.0 1.7 15.9 2,085 0.2Oklahoma Low 16 -11 3.9 3.0 Low 4.4 -0.6 5.2 $ 46,562 1.7 2.5 3.2 3,948 0.6Alabama Minimal 2 0 3.7 3.4 Low 4.5 -1.3 7.3 $ 41,994 3.3 2.5 1.0 4,871 0.2Arizona Minimal 4 0 8.5 7.5 Normal 5.1 -0.1 6.4 $ 43,230 3.0 3.2 20.7 7,076 2.1Arkansas Minimal 2 0 4.2 3.4 Low 3.4 -0.6 6.5 $ 40,392 0.8 2.3 -0.6 3,000 0.4California Minimal 2 0 7.9 7.5 Low 4.8 -0.6 7.3 $ 65,772 4.3 1.2 31.4 39,449 0.5Colorado Minimal 6 1 10.4 11.4 High 2.4 -1.0 5.4 $ 57,870 2.9 3.5 24.1 5,612 1.3Connecticut Minimal 8 6 1.7 0.4 Normal 5.0 -0.1 5.5 $ 73,352 3.1 0.8 -9.5 3,574 -0.1Delaware Minimal 2 0 2.3 2.6 Low 4.8 0.4 5.5 $ 73,261 2.6 5.2 -0.7 960 0.8District Of Columbia Minimal 2 0 6.7 8.8 Normal 6.4 0.4 7.7 $ 185,123 2.3 0.5 2.9 688 0.9Florida Minimal 3 1 9.7 9.8 Low 4.1 -0.8 6.3 $ 44,530 3.4 3.7 7.3 21,043 2.1Georgia Minimal 2 0 7.1 6.6 High 4.7 -0.6 6.1 $ 50,481 2.7 3.6 5.4 10,443 1.3Hawaii Minimal 2 0 6.0 6.6 Normal 2.7 -0.3 5.0 $ 58,485 2.2 1.3 52.0 1,432 0.2Idaho Minimal 4 -1 10.4 7.3 High 3.0 -0.8 6.0 $ 39,765 3.1 5.1 19.1 1,715 1.9Illinois Minimal 2 0 3.7 3.1 Low 4.8 -1.0 7.0 $ 61,514 2.6 0.8 4.4 12,798 0.0Indiana Minimal 2 0 4.9 3.4 Normal 3.1 -1.4 6.2 $ 51,243 3.9 2.2 15.4 6,655 0.3Iowa Minimal 2 0 4.3 3.5 Low 3.2 -0.5 4.6 $ 56,679 1.7 2.5 3.0 3,145 0.3Kansas Minimal 2 0 5.1 5.0 High 3.7 -0.5 4.7 $ 52,564 1.2 1.8 32.9 2,924 0.6Kentucky Minimal 2 0 5.3 4.0 Low 5.3 0.3 6.8 $ 44,104 4.4 1.7 1.0 4,449 0.3Maine Minimal 2 0 4.7 3.4 Low 3.7 -0.3 5.9 $ 44,477 2.2 2.9 -15.9 1,331 -0.1Maryland Minimal 2 0 3.7 2.8 Normal 4.0 -0.3 5.3 $ 62,592 3.7 1.9 6.5 6,034 0.3Massachusetts Minimal 2 0 6.7 5.3 Normal 4.3 0.7 5.6 $ 73,896 4.2 1.3 -9.8 6,846 0.5Michigan Minimal 2 0 7.6 5.7 Normal 3.7 -1.2 8.0 $ 48,919 3.9 1.5 24.0 9,925 0.0Minnesota Minimal 2 0 7.1 5.3 High 3.7 -0.2 4.9 $ 60,138 3.4 2.4 12.4 5,549 0.5Mississippi Minimal 10 2 2.7 3.0 Low 5.2 -0.7 7.6 $ 35,935 2.8 2.2 6.0 2,992 0.1Missouri Minimal 2 0 4.6 5.0 Low 3.8 -1.0 6.0 $ 49,220 3.0 1.9 -1.3 6,112 0.3Montana Minimal 2 0 5.0 4.2 Low 3.9 -0.2 5.8 $ 43,779 0.9 2.7 21.3 1,050 0.7Nebraska Minimal 2 0 7.2 4.2 Normal 2.8 -0.4 3.6 $ 60,201 2.6 2.8 8.3 1,920 0.7Nevada Minimal 4 1 9.4 9.7 Normal 4.8 -0.8 6.6 $ 49,343 3.7 3.6 19.0 3,003 2.2New Hampshire Minimal 2 0 5.8 4.0 Normal 2.8 -0.1 4.4 $ 57,836 3.5 2.3 -22.6 1,337 0.2New Jersey Minimal 2 0 2.8 2.8 Low 4.2 -0.9 6.4 $ 64,587 3.1 1.2 -22.9 8,957 0.1New York Minimal 2 0 4.3 3.9 Low 4.7 -0.2 6.6 $ 75,434 1.2 0.6 -14.8 19,752 0.0North Carolina Minimal 2 0 7.1 5.3 Normal 4.1 -0.8 5.8 $ 50,674 2.8 4.5 3.0 10,292 1.4Ohio Minimal 2 0 5.9 4.0 High 5.2 0.3 6.8 $ 53,480 5.0 1.4 16.5 11,621 0.1Oregon Minimal 2 0 10.0 11.7 Normal 3.8 -1.3 7.2 $ 55,198 1.5 2.4 9.3 4,160 1.6Pennsylvania Minimal 2 0 3.7 3.0 Low 5.0 -0.5 6.5 $ 56,244 4.4 1.4 -6.2 12,778 0.0Rhode Island Minimal 2 0 6.6 4.0 Normal 4.3 -1.1 6.6 $ 54,050 3.6 0.9 -7.5 1,058 0.1South Carolina Minimal 2 0 6.0 5.6 Low 3.9 -0.9 6.6 $ 42,134 2.6 5.4 0.1 5,021 1.2South Dakota Minimal 2 0 6.5 4.1 Low 3.1 0.2 3.7 $ 55,358 3.0 3.6 19.6 871 0.6Tennessee Minimal 2 0 7.5 6.6 Normal 3.4 -1.4 6.5 $ 49,053 3.4 3.7 5.4 6,707 0.8Texas Minimal 8 -1 8.5 7.9 Normal 4.3 -0.4 6.1 $ 57,556 3.5 3.9 4.0 28,316 1.6Utah Minimal 2 0 9.6 7.6 Normal 3.5 0.1 4.9 $ 50,531 4.2 4.5 21.5 3,114 2.1Vermont Minimal 2 0 1.8 1.7 Normal 3.1 -0.2 4.7 $ 49,408 2.8 1.6 -18.0 626 0.2Virginia Minimal 2 0 3.9 3.0 Normal 3.8 -0.3 4.8 $ 58,450 4.0 2.7 -3.2 8,458 0.6Washington Minimal 2 0 11.4 11.0 Normal 4.5 -1.0 7.1 $ 63,880 3.4 2.9 8.1 7,414 1.7Wisconsin Minimal 2 0 5.9 4.1 Normal 3.2 -1.0 5.6 $ 53,130 4.1 2.0 16.6 5,794 0.3

Pop. Weighted Average Minimal 4 0 5.9 5.9 Low 4.2 -0.7 5.8 $ 50,302 2.1 2.5 9.5 325,430 0.7



Housing and Mortgage Market Indicators

A N N UA L P ERCEN TAG E CH A N G E I N H O M E P R I CES

12- M O N T H CH A N G E I N H O M E P R I CES BY STAT E

Real Estate: FHFA House Price Index - Purchase-only; (Index 1991Q1=100; SA)

Real Estate: FHFA House Price Index - New and existing buildings - All transactions; (Index 1980Q1=100; SA)

S&P Dow Jones Indices LLC; CoreLogic, Inc.: S&P CoreLogic Case-Shiller Home Price Indices [CSUS-SA]

Home prices rose 5.8 percent year-over-year, according to the latest (June 2017) Standard & Poor’s (S&P)/Case-Shiller National Home Price Index, and 6.6 percent according to the FHFA Purchase-Only Index. The FHFA index is based on GSE loans, while the Case-Shiller index uses a broader selection of loans and different estimation methods. The median home price was up 6.4 percent in July from a year earlier, according to NAR.

Sources: CoreLogic® Case-Shiller/FHFA/NAR/Moody’s Analytics/Arch MI

The year-over-year change in the FHFA All-Transactions HPI as of 2017 Q2 was positive in all states, but varied substantially across the country. The fastest growth continued to be in Washington (11.4 percent), Colorado (10.4 percent), Idaho (10.4 percent), and Florida (9.7 percent). The slowest growth was in Alaska (0.7 percent), West Virginia (1.4 percent) and Wyoming (1.1 percent). Please see the State-Level tables on pages 8-9 for specific values.

Sources: FHFA/Moody’s Analytics/Arch MI



H O U S I N G A FF O RDA B I L I T Y I N D E X

U N EM P LOY M EN T R AT E BY CO U N T Y (S E ASO N A LLY A DJ U ST ED)

Miami Houston California United States

Housing affordability worsened due to higher home prices and interest rates, and the trend is likely to continue. For the nation, affordability is still very favorable compared to pre-crisis. We measure affordability using the Median Debt-to-Income (DTI) payment, which is defined as the percentage of the median household’s earnings needed to cover mortgage payments on the median house. Our payment calculations are based on a 10 percent down payment, annual expenses at 1.75 percent of the initial home price (insurance, dues and property taxes) and the prevailing 30-year fixed mortgage rate, plus 0.75 percent to cover mortgage insurance, risk add-ons, etc.)

Sources: Arch MI

While the national unemployment rate remains low, the picture is far more varied at the county level. Many rural areas in the Appalachian region remain weak from the drop in coal prices due to competitive pressure from cheap natural gas. Some rural areas in the Deep South and the West remain weak, as most employment gains have been in the larger cities. Some areas have been hurt by the drop in energy prices in oil- and gas-producing areas in Alaska, Montana, Louisiana, New Mexico, Oklahoma and Texas.

Sources: U.S. Bureau of Labor Statistics/Moody’s Analytics/Arch MI




FH FA A L L-T R A N SAC T I O N S H O U S E P R I CE I N D E X P ER CEN TAG E CH A N G E FR O M P R I O R P E A K (2 0 0 5 -2 0 0 8)

A N N UA L P ERCEN TAG E CH A N G E I N P ER C A P I TA I N CO M E

House prices in the United States have increased steadily since they bottomed in 2012 and have surpassed their prior peak levels; however, the growth is very unbalanced across states. The largest cumulative growth since house price peak during 2005-08 was in North Dakota (47 percent), followed by Colorado (44 percent) and Texas (39 percent). As of the second quarter of 2017, 15 states had house prices lower than their prior peaks. Nevada house prices were 20 percent lower and Connecticut 15 percent lower.

Sources: FHFA/Moody’s Analytics/Arch MI

The year-over-year change in per-capita income was strongest in Hawaii (4.1 percent), followed by New Hampshire (3.9 percent) and Maine (3.8 percent). Three states experienced negative year-over-year growth in per-capita income: Alaska (-2.1 percent), Wyoming (-1.8 percent) and North Dakota (-1.8 percent).

Sources: Moody’s Analytics/Arch MI



L A BO R M A RK E T I N D I C ATO RS

Y E A R- OV ER-Y E A R P ERCEN TAG E CH A N G E I N TOTA L EM P LOY M EN T

There was a record amount of job openings in July in the United States and the job hires rate was 3.8 percent, much higher than the historical average level of 3.5 percent. The quits rate stood at 2.2 percent, well above the historical average of 1.9 percent, and the layoffs and discharges rate ticked up from historical lows at 1.2 percent in July.


On a year-over-year basis, total employment has been growing since late 2010. For the United States, the annual growth rate in total employment is between 1.0 and 2.0 percent for most of the time. The growth rate in Texas has been more volatile, hitting 3.7 percent in late 2014 and 1.0 percent in mid-2016. In July, 2.4 percent more new jobs were created in Texas versus the same period a year ago.


Job openings rate - Total nonfarm; (%; SA)

Quits rate - Total nonfarm; (%; SA)

Job hires rate - Total nonfarm; (%; SA)

Layoffs and discharges rate - Total nonfarm; (%; SA)

New York TexasUnited States




U N EM P LOY M EN T R AT E (S E ASO N A LLY A DJ U ST ED)

M A X . , M I N . A N D CU RREN T U N EM P LOY M EN T R AT E BY STAT E (S E ASO N A LLY A DJ U ST ED)

The National (seasonally adjusted) unemployment rate remained unusually low in August at 4.4 percent. It was 4.9 percent a year earlier. The unemployment rate is the number of unemployed people who are actively looking for work divided by the total number of people in the workforce. U-6 is “underemployment,” a broader measure that adds to the unemployed part-time workers who want to work full-time and discouraged workers who say they would work but are not currently looking. This stands at 8.6 percent, much lower than its historic average of 10.3 percent.


The chart below shows the current unemployment rate for each state, along with the range from the beginning of 1976 until now. Alaska (7.0 percent) replaced New Mexico as the state with the highest unemployment rate, followed by the District of Columbia (6.4 percent) and New Mexico (6.3 percent), while North Dakota (2.2 percent) has the lowest unemployment rate.


U-6: unemployed + involuntary part-time + discouraged workersUnemployment Rate

Min. UR Current URMax. UR



U N EM P LOY M EN T R AT E BY STAT E (S E ASO N A LLY A DJ U ST ED)

12- M O N T H CH A N G E I N U N EM P LOY M EN T R AT E BY STAT E (S E ASO N A LLY A DJ U ST ED)

The Midwest had the lowest unemployment rates in the nation, often below 4.0 percent, while Massachusetts, Rhode Island and Texas were at the national level (4.3 percent). At 7.0 percent, Alaska had the highest unemployment rate, followed by the District of Columbia (6.4 percent) and New Mexico (6.3 percent).


This map shows the change in unemployment rates by state in July from a year earlier. Unemployment increased in Massachusetts (0.7 percent), Delaware (0.4 percent) and the District of Columbia (0.4 percent). The biggest improvements were in Indiana, Tennessee and Wyoming (all down by -1.4 percent).




S I N G LE- FA M I LY H O U S I N G STA R T S

Y E A R- OV ER-Y E A R CH A N G E I N H O U S I N G STA R T S

Single-Family Housing Starts increased 11.0 percent nationally from a year ago to 856,000 units (seasonally adjusted annual rate) in July. Smoothing out volatile monthly data (by taking a 12-month moving average) finds that multi-family starts are running at around 369,000 a year, 7.0 percent lower than a year ago.

Sources: U.S. Census Bureau/Moody’s Analytics/Arch MI

The growth in single-family housing starts is weakest in North Dakota (down 29 percent over a year ago), New Jersey (-9.0 percent), Oklahoma (-3.0 percent) and in New York (-3.0 percent). The strongest areas are in the middle and west of the country. California and Iowa housing starts both increased by 22 percent, followed by Hawaii (20 percent), and South Dakota (18 percent). All values are the changes in the 12-month moving average, to lessen volatility due to weather, etc.

Sources: U.S. Census Bureau/Moody’s Analytics/Arch MI

Multi-FamilySingle-Family



S I N G LE- FA M I LY H O M E SA LES

M O N T H S ’ SU P P LY O F H O M ES F O R SA LE

Sales of existing single-family homes in July came in at 4.84 million units (after annualizing the monthly number), an increase of 1.7 percent compared to the same time last year. Sales of newly constructed homes were 571,000 units (annualized rate), down 8.9 percent from a year ago.

Sources: NAR/Census Bureau/Moody’s Analytics/Arch MI

The months’ supply of existing single-family homes for sale (total current listings ÷ last month’s sales) was at 4.2 months in July, compared to 4.7 months at the same time a year ago. The months’ supply of new homes for sale, shown in green, increased to 5.8 months in July, compared to 4.5 months a year earlier.

Sources: NAR/Moody’s Analytics/Arch MI

Existing

Existing

New

New




50Statistical Areas Sorted by Risk Ranking, then State, then MSA

ARCH MI RISK INDEX % HOME PRICE CHANGE 50Statistical Areas Sorted by Risk Ranking, then State, then MSA

UNEMPLOYMENT RATE GROSS METRO PRODUCT

SINGLE-FAMILYHOUSING STARTS POPULATION

ST RISK RANKING 2017Q2 1-YR.

CHANGELONG

RUN AVG.HPA 1-YR. 2017Q2

HPA 1-YR. 2016Q1

HPA VOLATILITY 2017Q1 1-YR.

CHANGELONG

RUN AVG.PER CAPITA

2017Q11-YR. % CHANGE


1-YR. % CHANGE

2017Q1 (THS.)

1-YR. % CHANGE

Fort Lauderdale-Pompano Beach-Deerfield Beach, FL FL Moderate 35 32 25 8.7 9.3 Low Fort Lauderdale-Pompano Beach-Deerfield Beach, FL 3.8 -0.8 5.9 $ 50,169 5.3 1.0 29.9 1,943 1.8Nashville-Davidson--Murfreesboro--Franklin, TN TN Moderate 35 32 17 10.3 9.9 Low Nashville-Davidson--Murfreesboro--Franklin, TN 2.6 -1.2 4.8 $ 61,041 5.8 6.9 1.0 1,902 2.0Miami-Miami Beach-Kendall, FL FL Low 17 15 24 8.8 10.5 Low Miami-Miami Beach-Kendall, FL 4.7 -0.6 6.4 $ 50,477 4.8 1.0 -17.7 2,751 1.4West Palm Beach-Boca Raton-Delray Beach, FL FL Low 11 6 27 9.4 10.4 Low West Palm Beach-Boca Raton-Delray Beach, FL 4.1 -0.8 6.8 $ 50,123 6.0 1.7 -2.4 1,483 2.7Austin-Round Rock, TX TX Low 25 20 17 8.3 9.5 Normal Austin-Round Rock, TX 3.2 -0.1 4.3 $ 62,370 5.6 7.1 6.6 2,115 2.8Phoenix-Mesa-Scottsdale, AZ AZ Minimal 5 0 24 9.1 8.2 Low Phoenix-Mesa-Scottsdale, AZ 4.3 -0.1 5.1 $ 48,299 5.6 4.2 22.0 4,768 2.3Anaheim-Santa Ana-Irvine, CA CA Minimal 7 5 25 6.5 6.1 Low Anaheim-Santa Ana-Irvine, CA 3.6 -0.4 5.1 $ 87,355 4.3 1.5 15.6 3,179 0.2Los Angeles-Long Beach-Glendale, CA CA Minimal 2 0 28 8.3 7.1 Low Los Angeles-Long Beach-Glendale, CA 4.5 -0.7 7.5 $ 73,190 4.7 0.6 31.4 10,158 0.2Oakland-Hayward-Berkeley, CA CA Minimal 2 0 26 8.5 10.2 Normal Oakland-Hayward-Berkeley, CA 3.9 -0.4 5.9 $ 68,019 5.1 1.6 15.4 2,801 0.6Riverside-San Bernardino-Ontario, CA CA Minimal 2 0 26 8.2 6.4 Low Riverside-San Bernardino-Ontario, CA 5.2 -0.7 7.9 $ 42,034 5.3 2.7 59.1 4,539 0.2Sacramento--Roseville--Arden-Arcade, CA CA Minimal 2 0 28 10.4 7.9 Low Sacramento--Roseville--Arden-Arcade, CA 4.7 -0.6 6.7 $ 61,761 4.7 2.9 26.4 2,311 0.6San Diego-Carlsbad, CA CA Minimal 2 0 26 8.6 7.0 Low San Diego-Carlsbad, CA 4.2 -0.5 5.9 $ 72,203 4.9 1.1 56.8 3,340 0.7San Francisco-Redwood City-South San Francisco, CA CA Minimal 2 0 25 7.1 10.4 Normal San Francisco-Redwood City-South San Francisco, CA 2.9 -0.3 4.9 $ 128,685 5.2 0.3 3.1 1,641 0.3San Jose-Sunnyvale-Santa Clara, CA CA Minimal 2 0 29 5.2 9.8 Normal San Jose-Sunnyvale-Santa Clara, CA 3.5 -0.3 5.9 $ 103,149 5.1 1.3 18.7 1,981 0.1Denver-Aurora-Lakewood, CO CO Minimal 8 2 16 11.3 12.1 Normal Denver-Aurora-Lakewood, CO 2.3 -0.9 4.8 $ 65,728 4.0 3.9 27.5 2,890 1.3Washington-Arlington-Alexandria, DC-VA-MD-WV DC Minimal 2 0 21 5.3 4.1 Normal Washington-Arlington-Alexandria, DC-VA-MD-WV 3.9 -0.1 4.4 $ 81,399 5.4 2.3 2.4 4,875 0.7Jacksonville, FL FL Minimal 2 0 25 7.7 8.4 Normal Jacksonville, FL 4.0 -0.8 5.5 $ 49,527 6.0 6.5 5.7 1,506 1.9Orlando-Kissimmee-Sanford, FL FL Minimal 2 0 24 12.5 8.0 Low Orlando-Kissimmee-Sanford, FL 3.8 -0.8 5.6 $ 55,938 6.7 5.7 -0.8 2,517 3.1Tampa-St. Petersburg-Clearwater, FL FL Minimal 2 0 23 11.3 10.7 Normal Tampa-St. Petersburg-Clearwater, FL 3.9 -0.8 5.7 $ 50,104 5.6 4.3 24.8 3,085 1.7Atlanta-Sandy Springs-Roswell, GA GA Minimal 2 0 22 8.7 7.6 Normal Atlanta-Sandy Springs-Roswell, GA 4.5 -0.5 5.6 $ 59,826 5.7 4.1 1.3 5,893 1.8Chicago-Naperville-Arlington Heights, IL IL Minimal 2 0 29 4.9 3.7 Low Chicago-Naperville-Arlington Heights, IL 4.5 -1.3 6.8 $ 69,451 3.6 0.7 10.1 7,313 0.1Indianapolis-Carmel-Anderson, IN IN Minimal 2 0 15 7.1 3.5 Normal Indianapolis-Carmel-Anderson, IN 3.0 -1.1 4.9 $ 62,810 5.9 3.6 19.0 2,023 0.9Boston, MA MA Minimal 2 0 25 7.2 6.2 Low Boston, MA 4.1 0.8 5.3 $ 100,186 5.4 0.8 -21.4 2,007 0.6Cambridge-Newton-Framingham, MA MA Minimal 2 0 22 7.6 5.6 Low Cambridge-Newton-Framingham, MA 3.9 0.8 5.0 $ 81,648 5.5 0.8 -33.1 2,382 0.6Baltimore-Columbia-Towson, MD MD Minimal 2 0 23 3.4 2.3 Low Baltimore-Columbia-Towson, MD 4.1 -0.2 5.5 $ 68,249 4.2 1.7 -3.0 2,801 0.1Detroit-Dearborn-Livonia, MI MI Minimal 2 0 48 8.3 5.7 Low Detroit-Dearborn-Livonia, MI 4.1 -2.1 8.5 $ 49,961 4.2 0.7 20.9 1,739 -0.6Warren-Troy-Farmington Hills, MI MI Minimal 2 0 31 7.7 5.9 Low Warren-Troy-Farmington Hills, MI 2.8 -1.8 6.5 $ 60,474 4.8 2.4 23.3 2,560 0.5Minneapolis-St. Paul-Bloomington, MN-WI MN Minimal 2 0 25 7.8 5.7 Normal Minneapolis-St. Paul-Bloomington, MN-WI 3.5 -0.1 4.2 $ 67,452 4.1 2.8 21.4 3,588 1.0Kansas City, MO-KS MO Minimal 2 0 21 7.3 5.8 Normal Kansas City, MO-KS 3.8 -0.7 5.3 $ 58,057 4.9 3.0 14.9 2,120 0.7St. Louis, MO-IL MO Minimal 2 0 21 4.6 4.5 Low St. Louis, MO-IL 4.0 -0.8 5.8 $ 56,291 4.1 2.2 16.3 2,810 0.1Charlotte-Concord-Gastonia, NC-SC NC Minimal 2 0 15 10.1 7.0 Low Charlotte-Concord-Gastonia, NC-SC 3.9 -0.8 5.8 $ 58,038 5.5 5.7 -1.5 2,524 2.0Newark, NJ-PA NJ Minimal 2 0 26 3.2 2.4 Low Newark, NJ-PA 4.2 -0.8 5.9 $ 74,032 2.9 0.8 -5.9 2,510 0.1Las Vegas-Henderson-Paradise, NV NV Minimal 2 0 28 9.8 8.3 Normal Las Vegas-Henderson-Paradise, NV 4.9 -0.8 6.5 $ 50,087 5.6 4.4 18.3 2,211 2.6Nassau County-Suffolk County, NY NY Minimal 2 0 31 4.7 4.0 Low Nassau County-Suffolk County, NY 4.3 0.1 5.0 $ 67,134 3.2 0.5 -13.8 2,854 0.0New York-Jersey City-White Plains, NY-NJ NY Minimal 2 0 27 4.2 4.2 Low New York-Jersey City-White Plains, NY-NJ 4.4 -0.7 6.8 $ 82,970 3.8 0.4 -23.1 14,445 0.3Cincinnati, OH-KY-IN OH Minimal 2 0 18 5.8 4.3 Low Cincinnati, OH-KY-IN 4.4 0.1 5.5 $ 59,910 5.7 2.2 19.6 2,175 0.5Cleveland-Elyria, OH OH Minimal 2 0 27 5.7 3.3 Normal Cleveland-Elyria, OH 6.0 0.7 5.4 $ 61,903 4.0 1.5 17.7 2,049 -0.3Columbus, OH OH Minimal 2 0 16 9.2 6.0 Normal Columbus, OH 4.2 0.0 5.0 $ 63,383 6.4 2.4 12.9 2,063 1.0Portland-Vancouver-Hillsboro, OR-WA OR Minimal 2 0 20 10.8 13.5 Low Portland-Vancouver-Hillsboro, OR-WA 3.6 -1.2 6.0 $ 66,393 4.6 2.7 -3.4 2,476 2.1Montgomery County-Bucks County-Chester County, PA PA Minimal 2 0 22 3.0 2.5 Low Montgomery County-Bucks County-Chester County, PA 4.1 -0.3 4.7 $ 75,500 4.6 1.6 -7.2 1,969 0.2Philadelphia, PA PA Minimal 2 0 26 6.1 4.1 Normal Philadelphia, PA 5.8 -0.5 7.0 $ 56,971 5.1 0.5 -26.5 2,133 0.1Pittsburgh, PA PA Minimal 2 0 9 4.3 4.6 Normal Pittsburgh, PA 5.2 -0.6 5.8 $ 66,135 3.7 1.5 1.9 2,342 0.0Providence-Warwick, RI-MA RI Minimal 2 0 28 6.3 4.6 Low Providence-Warwick, RI-MA 4.7 -0.4 6.9 $ 53,651 3.7 1.0 -9.4 1,617 0.1Dallas-Plano-Irving, TX TX Minimal 8 3 13 11.6 11.0 Normal Dallas-Plano-Irving, TX 3.8 -0.1 5.3 $ 72,206 5.7 5.0 7.6 4,889 2.0Fort Worth-Arlington, TX TX Minimal 10 1 12 11.7 9.9 Low Fort Worth-Arlington, TX 3.8 -0.3 5.3 $ 53,662 4.0 3.6 27.2 2,488 2.0Houston-The Woodlands-Sugar Land, TX TX Minimal 8 -22 14 5.5 4.2 Normal Houston-The Woodlands-Sugar Land, TX 4.8 -0.6 5.8 $ 67,042 2.1 5.7 9.6 6,902 1.9San Antonio-New Braunfels, TX TX Minimal 8 -1 17 9.2 5.1 Normal San Antonio-New Braunfels, TX 3.6 -0.2 5.1 $ 50,036 4.3 2.8 1.6 2,470 1.7Virginia Beach-Norfolk-Newport News, VA-NC VA Minimal 2 0 25 2.9 2.4 Normal Virginia Beach-Norfolk-Newport News, VA-NC 4.3 -0.4 4.9 $ 58,488 3.9 2.3 -2.2 1,732 0.3Seattle-Bellevue-Everett, WA WA Minimal 2 0 20 14.0 12.7 Normal Seattle-Bellevue-Everett, WA 3.5 -0.5 5.1 $ 94,499 6.8 2.2 0.3 2,996 2.0Milwaukee-Waukesha-West Allis, WI WI Minimal 2 0 22 5.8 3.8 Low Milwaukee-Waukesha-West Allis, WI 3.4 -1.1 5.2 $ 60,344 3.3 1.2 6.9 1,572 0.0

Arch MI Risk Index for the 50 Largest MSAs

LARGEST METROPOLITAN


50Statistical Areas Sorted by Risk Ranking, then State, then MSA

ARCH MI RISK INDEX % HOME PRICE CHANGE 50Statistical Areas Sorted by Risk Ranking, then State, then MSA

UNEMPLOYMENT RATE GROSS METRO PRODUCT

SINGLE-FAMILYHOUSING STARTS POPULATION

ST RISK RANKING 2017Q2 1-YR.

CHANGELONG

RUN AVG.HPA 1-YR. 2017Q2

HPA 1-YR. 2016Q1

HPA VOLATILITY 2017Q1 1-YR.

CHANGELONG

RUN AVG.PER CAPITA

2017Q11-YR. % CHANGE


1-YR. % CHANGE

2017Q1 (THS.)

1-YR. % CHANGE

Fort Lauderdale-Pompano Beach-Deerfield Beach, FL FL Moderate 35 32 25 8.7 9.3 Low Fort Lauderdale-Pompano Beach-Deerfield Beach, FL 3.8 -0.8 5.9 $ 50,169 5.3 1.0 29.9 1,943 1.8Nashville-Davidson--Murfreesboro--Franklin, TN TN Moderate 35 32 17 10.3 9.9 Low Nashville-Davidson--Murfreesboro--Franklin, TN 2.6 -1.2 4.8 $ 61,041 5.8 6.9 1.0 1,902 2.0Miami-Miami Beach-Kendall, FL FL Low 17 15 24 8.8 10.5 Low Miami-Miami Beach-Kendall, FL 4.7 -0.6 6.4 $ 50,477 4.8 1.0 -17.7 2,751 1.4West Palm Beach-Boca Raton-Delray Beach, FL FL Low 11 6 27 9.4 10.4 Low West Palm Beach-Boca Raton-Delray Beach, FL 4.1 -0.8 6.8 $ 50,123 6.0 1.7 -2.4 1,483 2.7Austin-Round Rock, TX TX Low 25 20 17 8.3 9.5 Normal Austin-Round Rock, TX 3.2 -0.1 4.3 $ 62,370 5.6 7.1 6.6 2,115 2.8Phoenix-Mesa-Scottsdale, AZ AZ Minimal 5 0 24 9.1 8.2 Low Phoenix-Mesa-Scottsdale, AZ 4.3 -0.1 5.1 $ 48,299 5.6 4.2 22.0 4,768 2.3Anaheim-Santa Ana-Irvine, CA CA Minimal 7 5 25 6.5 6.1 Low Anaheim-Santa Ana-Irvine, CA 3.6 -0.4 5.1 $ 87,355 4.3 1.5 15.6 3,179 0.2Los Angeles-Long Beach-Glendale, CA CA Minimal 2 0 28 8.3 7.1 Low Los Angeles-Long Beach-Glendale, CA 4.5 -0.7 7.5 $ 73,190 4.7 0.6 31.4 10,158 0.2Oakland-Hayward-Berkeley, CA CA Minimal 2 0 26 8.5 10.2 Normal Oakland-Hayward-Berkeley, CA 3.9 -0.4 5.9 $ 68,019 5.1 1.6 15.4 2,801 0.6Riverside-San Bernardino-Ontario, CA CA Minimal 2 0 26 8.2 6.4 Low Riverside-San Bernardino-Ontario, CA 5.2 -0.7 7.9 $ 42,034 5.3 2.7 59.1 4,539 0.2Sacramento--Roseville--Arden-Arcade, CA CA Minimal 2 0 28 10.4 7.9 Low Sacramento--Roseville--Arden-Arcade, CA 4.7 -0.6 6.7 $ 61,761 4.7 2.9 26.4 2,311 0.6San Diego-Carlsbad, CA CA Minimal 2 0 26 8.6 7.0 Low San Diego-Carlsbad, CA 4.2 -0.5 5.9 $ 72,203 4.9 1.1 56.8 3,340 0.7San Francisco-Redwood City-South San Francisco, CA CA Minimal 2 0 25 7.1 10.4 Normal San Francisco-Redwood City-South San Francisco, CA 2.9 -0.3 4.9 $ 128,685 5.2 0.3 3.1 1,641 0.3San Jose-Sunnyvale-Santa Clara, CA CA Minimal 2 0 29 5.2 9.8 Normal San Jose-Sunnyvale-Santa Clara, CA 3.5 -0.3 5.9 $ 103,149 5.1 1.3 18.7 1,981 0.1Denver-Aurora-Lakewood, CO CO Minimal 8 2 16 11.3 12.1 Normal Denver-Aurora-Lakewood, CO 2.3 -0.9 4.8 $ 65,728 4.0 3.9 27.5 2,890 1.3Washington-Arlington-Alexandria, DC-VA-MD-WV DC Minimal 2 0 21 5.3 4.1 Normal Washington-Arlington-Alexandria, DC-VA-MD-WV 3.9 -0.1 4.4 $ 81,399 5.4 2.3 2.4 4,875 0.7Jacksonville, FL FL Minimal 2 0 25 7.7 8.4 Normal Jacksonville, FL 4.0 -0.8 5.5 $ 49,527 6.0 6.5 5.7 1,506 1.9Orlando-Kissimmee-Sanford, FL FL Minimal 2 0 24 12.5 8.0 Low Orlando-Kissimmee-Sanford, FL 3.8 -0.8 5.6 $ 55,938 6.7 5.7 -0.8 2,517 3.1Tampa-St. Petersburg-Clearwater, FL FL Minimal 2 0 23 11.3 10.7 Normal Tampa-St. Petersburg-Clearwater, FL 3.9 -0.8 5.7 $ 50,104 5.6 4.3 24.8 3,085 1.7Atlanta-Sandy Springs-Roswell, GA GA Minimal 2 0 22 8.7 7.6 Normal Atlanta-Sandy Springs-Roswell, GA 4.5 -0.5 5.6 $ 59,826 5.7 4.1 1.3 5,893 1.8Chicago-Naperville-Arlington Heights, IL IL Minimal 2 0 29 4.9 3.7 Low Chicago-Naperville-Arlington Heights, IL 4.5 -1.3 6.8 $ 69,451 3.6 0.7 10.1 7,313 0.1Indianapolis-Carmel-Anderson, IN IN Minimal 2 0 15 7.1 3.5 Normal Indianapolis-Carmel-Anderson, IN 3.0 -1.1 4.9 $ 62,810 5.9 3.6 19.0 2,023 0.9Boston, MA MA Minimal 2 0 25 7.2 6.2 Low Boston, MA 4.1 0.8 5.3 $ 100,186 5.4 0.8 -21.4 2,007 0.6Cambridge-Newton-Framingham, MA MA Minimal 2 0 22 7.6 5.6 Low Cambridge-Newton-Framingham, MA 3.9 0.8 5.0 $ 81,648 5.5 0.8 -33.1 2,382 0.6Baltimore-Columbia-Towson, MD MD Minimal 2 0 23 3.4 2.3 Low Baltimore-Columbia-Towson, MD 4.1 -0.2 5.5 $ 68,249 4.2 1.7 -3.0 2,801 0.1Detroit-Dearborn-Livonia, MI MI Minimal 2 0 48 8.3 5.7 Low Detroit-Dearborn-Livonia, MI 4.1 -2.1 8.5 $ 49,961 4.2 0.7 20.9 1,739 -0.6Warren-Troy-Farmington Hills, MI MI Minimal 2 0 31 7.7 5.9 Low Warren-Troy-Farmington Hills, MI 2.8 -1.8 6.5 $ 60,474 4.8 2.4 23.3 2,560 0.5Minneapolis-St. Paul-Bloomington, MN-WI MN Minimal 2 0 25 7.8 5.7 Normal Minneapolis-St. Paul-Bloomington, MN-WI 3.5 -0.1 4.2 $ 67,452 4.1 2.8 21.4 3,588 1.0Kansas City, MO-KS MO Minimal 2 0 21 7.3 5.8 Normal Kansas City, MO-KS 3.8 -0.7 5.3 $ 58,057 4.9 3.0 14.9 2,120 0.7St. Louis, MO-IL MO Minimal 2 0 21 4.6 4.5 Low St. Louis, MO-IL 4.0 -0.8 5.8 $ 56,291 4.1 2.2 16.3 2,810 0.1Charlotte-Concord-Gastonia, NC-SC NC Minimal 2 0 15 10.1 7.0 Low Charlotte-Concord-Gastonia, NC-SC 3.9 -0.8 5.8 $ 58,038 5.5 5.7 -1.5 2,524 2.0Newark, NJ-PA NJ Minimal 2 0 26 3.2 2.4 Low Newark, NJ-PA 4.2 -0.8 5.9 $ 74,032 2.9 0.8 -5.9 2,510 0.1Las Vegas-Henderson-Paradise, NV NV Minimal 2 0 28 9.8 8.3 Normal Las Vegas-Henderson-Paradise, NV 4.9 -0.8 6.5 $ 50,087 5.6 4.4 18.3 2,211 2.6Nassau County-Suffolk County, NY NY Minimal 2 0 31 4.7 4.0 Low Nassau County-Suffolk County, NY 4.3 0.1 5.0 $ 67,134 3.2 0.5 -13.8 2,854 0.0New York-Jersey City-White Plains, NY-NJ NY Minimal 2 0 27 4.2 4.2 Low New York-Jersey City-White Plains, NY-NJ 4.4 -0.7 6.8 $ 82,970 3.8 0.4 -23.1 14,445 0.3Cincinnati, OH-KY-IN OH Minimal 2 0 18 5.8 4.3 Low Cincinnati, OH-KY-IN 4.4 0.1 5.5 $ 59,910 5.7 2.2 19.6 2,175 0.5Cleveland-Elyria, OH OH Minimal 2 0 27 5.7 3.3 Normal Cleveland-Elyria, OH 6.0 0.7 5.4 $ 61,903 4.0 1.5 17.7 2,049 -0.3Columbus, OH OH Minimal 2 0 16 9.2 6.0 Normal Columbus, OH 4.2 0.0 5.0 $ 63,383 6.4 2.4 12.9 2,063 1.0Portland-Vancouver-Hillsboro, OR-WA OR Minimal 2 0 20 10.8 13.5 Low Portland-Vancouver-Hillsboro, OR-WA 3.6 -1.2 6.0 $ 66,393 4.6 2.7 -3.4 2,476 2.1Montgomery County-Bucks County-Chester County, PA PA Minimal 2 0 22 3.0 2.5 Low Montgomery County-Bucks County-Chester County, PA 4.1 -0.3 4.7 $ 75,500 4.6 1.6 -7.2 1,969 0.2Philadelphia, PA PA Minimal 2 0 26 6.1 4.1 Normal Philadelphia, PA 5.8 -0.5 7.0 $ 56,971 5.1 0.5 -26.5 2,133 0.1Pittsburgh, PA PA Minimal 2 0 9 4.3 4.6 Normal Pittsburgh, PA 5.2 -0.6 5.8 $ 66,135 3.7 1.5 1.9 2,342 0.0Providence-Warwick, RI-MA RI Minimal 2 0 28 6.3 4.6 Low Providence-Warwick, RI-MA 4.7 -0.4 6.9 $ 53,651 3.7 1.0 -9.4 1,617 0.1Dallas-Plano-Irving, TX TX Minimal 8 3 13 11.6 11.0 Normal Dallas-Plano-Irving, TX 3.8 -0.1 5.3 $ 72,206 5.7 5.0 7.6 4,889 2.0Fort Worth-Arlington, TX TX Minimal 10 1 12 11.7 9.9 Low Fort Worth-Arlington, TX 3.8 -0.3 5.3 $ 53,662 4.0 3.6 27.2 2,488 2.0Houston-The Woodlands-Sugar Land, TX TX Minimal 8 -22 14 5.5 4.2 Normal Houston-The Woodlands-Sugar Land, TX 4.8 -0.6 5.8 $ 67,042 2.1 5.7 9.6 6,902 1.9San Antonio-New Braunfels, TX TX Minimal 8 -1 17 9.2 5.1 Normal San Antonio-New Braunfels, TX 3.6 -0.2 5.1 $ 50,036 4.3 2.8 1.6 2,470 1.7Virginia Beach-Norfolk-Newport News, VA-NC VA Minimal 2 0 25 2.9 2.4 Normal Virginia Beach-Norfolk-Newport News, VA-NC 4.3 -0.4 4.9 $ 58,488 3.9 2.3 -2.2 1,732 0.3Seattle-Bellevue-Everett, WA WA Minimal 2 0 20 14.0 12.7 Normal Seattle-Bellevue-Everett, WA 3.5 -0.5 5.1 $ 94,499 6.8 2.2 0.3 2,996 2.0Milwaukee-Waukesha-West Allis, WI WI Minimal 2 0 22 5.8 3.8 Low Milwaukee-Waukesha-West Allis, WI 3.4 -1.1 5.2 $ 60,344 3.3 1.2 6.9 1,572 0.0

LARGEST METROPOLITAN

Cautionary Statement: Statements in this document that relate to future plans, events or performance are “forward-looking” statements. These forward-looking statements include our expectations with respect to national and regional economic activity, employment trends, consumer spending and borrowing, interest rates, home sales, housing starts, population growth, and price trends as well as other trends in housing, financial and mortgage markets. Readers are cautioned that forward-looking statements by their nature involve risk and uncertainty because they relate to events and circumstances that will occur in the future. Many factors could cause actual results and developments to differ materially from those expressed or implied by forward-looking statements, such as different than expected levels and growth rates of national or regional economic activity; changes in monetary and fiscal policy, sources and uses of bank liquidity, and credit and other market disruptions; fluctuations in oil and gas prices; natural and man-made disasters; changes in international economic and financial conditions; changes in interest rates, lending standards, housing prices, and employment rates; foreclosure trends, regulatory and legislative developments; and other factors identified in Arch Capital Group Ltd.’s (“Arch”) filings with the U.S. Securities and Exchange Commission. From time to time, Arch Capital posts additional financial information and presentations, including information about Arch MI, to archcapgroup.com, and Arch MI posts information about its business to archmi.com, and investors and other recipients of this information are encouraged to check these websites. Arch MI undertakes no obligation to update forward-looking statements.

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© 2017 Arch Mortgage Insurance Company, Arch Mortgage Guaranty 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. CoreLogic is a registered mark of CoreLogic. Collateral Analytics is a trade mark of Collateral Analytics. Realtors is a registered mark of the National Association of Realtors. M

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