Little chance of a housing bust says mortgage insurer

by Steve Randall10 Jan 2019

Another outlook for the US housing market in 2019 is citing affordability as the key issue for many markets.

Mortgage insurer Arch MI says that it expected worsening affordability as average prices increase 2-5%; but with regional variations based on availability and demand.

Those areas where demand will be strong include popular retirement areas near water, and those areas popular with professionals and coastal buyers such as coastal international hubs. ‘Magnet cities’ that are popular with millennials will also see growth in average prices.

Some areas may see a decline in prices though and this could include some of the hottest markets but, conversely, some of those that are already weak. These declines will be driven by higher interest rates.

Is a bust likely?
Dr. Ralph G. DeFranco, Global Chief Economist for Arch Capital Services Inc, says that despite some declining prices a crash is unlikely because the signs of a bubble are not evident.

“The housing market has gone from a full boil to a slow simmer, but it’s nowhere near ice-cold,” he said. “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 Arch MI Risk Index predicts that the probability of home prices being lower in 2 years is just 6%; and the report calls for rising prices across every state.

Those states with higher risk are Alaska (27%), West Virginia (19%), and Connecticut (19%). Among larger metros, Houston and San Antonio are most at risk (both 20%).

 


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