Housing bubble unlikely despite affordability issues says Arch MI

House prices are expected to continue to outpace inflation due to tight inventory, with the risk of prices falling remaining low

Housing bubble unlikely despite affordability issues says Arch MI
House prices are expected to continue to outpace inflation due to tight inventory, with the risk of prices falling remaining low.

A risk model from mortgage insurer Arch puts the likelihood of price declines across the US over the next 2 years at 4%, down from 6% a year ago and 8% in 2015.

“Housing is not in a bubble relative to incomes or monthly payments, either in a historical or international context,” said Dr. Ralph G. DeFranco, Global Chief Economist, Mortgage Services of Arch Capital Services Inc.

“Even as homeownership remains out of reach for many people, a growing housing shortage will continue to push up national home prices faster than inflation for the foreseeable future,” added DeFranco.

Dr DeFranco says that there are some negatives including weak wage growth and a tripling of student debt in the past decade, but the tight supply of homes as employment grows is a more important factor.

While the stats show a nationwide buoyancy for home prices, some areas will continue to see declining prices, mainly those in the energy-extraction states.

For that reason, Wyoming, North Dakota, and Alaska remain the three states most at risk of home price declines although higher energy prices should begin to ease the risk. On a metro basis, Houston-The Woodlands-Sugarland, TX has the highest risk of price decline.
 

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