The likelihood of home price decreases throughout the United States over the next 2 years remains surprisingly low – only 4 %, in accordance with the Fall 2016 Housing and Mortgage Market Review provided by Arch Mortgage Insurance Company.
Likelihood of home price decreases? 4% and dropping
Even though the overall risk is merely 4%, it’s also on the decline. A year ago, the risk was 6%; two years ago, it was 13%. In Florida, the two-year risk of a housing price decline is merely 2%..
Despite the low overall chance of home price decreases, however, some parts of the U.S. have decelerating home price growth and stay at heightened risk for home price declines. Those areas are typically the energy-extraction (coal, oil or natural gas) states.
“Apart from some underlying issues that continue to hold back the housing sector, ranging from weak wage growth to skyrocketing student debt, strong dynamics are now in place that will continue pushing up home prices faster than inflation for the foreseeable future,” says Dr. Ralph G. DeFranco, global chief economist, mortgage services at Arch. “Positive fundamentals in today’s housing market include affordability, job growth, a shortage of housing, rising rents and under-priced or fairly valued housing in most areas of the country. Given these positives for home prices, it isn’t surprising that there is a low probability home prices will decrease in two years.”
The report presents the state- and metro-level Arch MI Risk Index. The company bases its risk assessment on recent economic and housing market data.
The Fall 2016 edition also has an exclusive report on regional oil shocks and the home price index that compares the decreases in oil prices over the past two years to the oil shock of the mid-1980s. Although there was a similar decline in crude oil prices of roughly 60 % both then (November 1985 to March 1986) and now (June 2014 to year-end 2015), the size of the employment shock in the 1980s was far larger than the most recent event.
Today’s housing market continues to be less affected by the decline in oil prices, thanks to both a greater economic diversity and since the 1980s home-price drop was amplified by the savings and loan crisis.
On a state level, North Dakota, Wyoming and West Virginia remain the states most at risk of home prices declines. The economies in these three states are presently in recession with weakening employment, due primarily to declines in energy-related jobs. North Dakota contains the highest Arch MI Risk Index value at 47 (a 47% possibility of a value decline of any magnitude within the next 24 months); Wyoming has a Risk Index of 44; West Virginia has a Risk Index of 31.
So what is holding you back? Interest rates are at an all time low too. Nick & Cindy Davis are here to assist you with all your real estate needs. We are always just a click here or call to 813-300-7116 away.