Arch MI’s New Housing and Mortgage Market Review Features Special Report on Millennials and Ranks the 25 Best Markets for Affordability and Job Growth

With Homebuying Costs Up Sharply, Arch MI’s Fall 2018 Report Identifies Challenges and Opportunities for Millennials

GREENSBORO, N.C.--(BUSINESS WIRE)--Millennials, a key driver of the housing market, are the focus of a special edition of The Housing and Mortgage Market Review (HaMMR) released today by Arch Mortgage Insurance Company (“Arch MI”). With Millennial home ownership on the rise, the report ranks 25 affordable cities with solid growth, examines how the age distribution points to increased housing demand over the next decade and lists key facts these homebuyers need to know.

The report also concludes that, because the supply of homes trails the demand by as much as 2 million units, prices are likely to continue rising.

“It’s important for potential buyers to understand that many markets remain reasonably affordable by historic norms, but this may not last much longer since the consensus forecast is for prices and interest rates to continue increasing,” said Dr. Ralph G. DeFranco, Global Chief Economist for Arch Capital Services Inc. “The good news is there are many cities with vibrant job markets and homes that are more affordable than the nation as a whole. One factor that needlessly hinders some potential first-time buyers is the incorrect idea that you need a 20 percent down payment when, in reality, most first-time homebuyers put down between 3 and 10 percent. Unfortunately, delaying a purchase decision in the current market will likely mean paying more later.”

Fall 2018 HaMMR

Top Five Most Affordable Cities with Both Strong Labor and Housing Markets

Rank	Metro Name	State	Job Growth Y/Y %	Home Price Growth Y/Y %	Median DTI Now	1987–2004 Avg. Median DTI
1	Fort Worth-Arlington	TX	2.7	9.8	27%	26%
2	Jacksonville	FL	3.0	9.7	28%	27%
3	Oklahoma City	OK	2.2	4.6	19%	22%
4	Charlotte-Concord-Gastonia	NC	2.6	9.3	27%	22%
5	Grand Rapids-Wyoming	MI	2.0	8.6	24%	23%
	United States	US	1.6	6.6	31%	34%

All 25 of the cities listed in the report have better overall affordability than the U.S. overall, which currently requires 31 percent of the median household’s income to cover mortgage payments on a median-priced home.

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 is unusually low at 6 percent, up 1 percent from the previous quarter due to worsening affordability, particularly in Western states. 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 26 percent, followed by West Virginia at 19 percent. Among larger metros, Houston, Texas (22 percent) and Denver, Colorado (18 percent) are the riskiest because their home prices are far higher than expected compared to the historical relationship between prices and incomes.

Alaska, West Virginia and Texas have the highest probability of home price declines over the next two years due to the lingering effects of weakness in the energy-extraction sector. However, risks in these areas are trending down in tandem with higher oil prices.

Fall 2018 Arch MI Risk Index

States with the Highest Risk Index Values (Probability of Price Decline Times 100)

State	Risk Index	Change in Quarter
Alaska	26	-1
West Virginia	19	-3
Texas	18	2
Connecticut	18	3
North Dakota	17	-3
Wyoming	15	-4
Colorado	13	5
Idaho	11	4
Mississippi	11	2
Oklahoma	11	-2

Commentary resources:

• The Housing and Mortgage Market Review is posted at archmi.com/hammr. The Fall 2018 edition summarizes current U.S. housing market conditions and focuses on Millennials.
• Dr. DeFranco will host a Housing Update webinar discussing market conditions and the details of HaMMR on Oct. 23 and 24. Registration is free at archmi.com/hammr.
• Detailed and interactive regional graphs and maps showing home prices and estimates of over-/ undervaluation are also available at archmi.com/hammr by clicking on the HPI Charts link.

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 Commission.

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.

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© 2018 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.