Home prices to rise in 2019, but no sign of a bubble forming: Arch
Home prices are expected to increase in 2019, but there is little chance for a bust because the typical warning signs a bubble is forming aren't evident, a report from Arch MI said.
The national average home price should rise between 2% and 5%, Arch MI said in its Housing and Mortgage Market Review. But it is possible some slow-growing markets will see prices decline.
"The housing market has gone from a full boil to a slow simmer, but it's nowhere near ice-cold," said Arch Capital Services Global Chief Economist Ralph DeFranco in a press release. "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 typical warning signs of a bubble — excessive debt levels, poor quality loans, exponentially increasing home prices, rising vacancy rates and a high number of internet searches on house flipping — are not present in the current housing market, he said.
"The one warning sign flashing red at the moment is poor affordability compared to the past in many metros," DeFranco said in the report. "But the trend of firms to concentrate in denser cities, together with interest rates lower than the historical average, suggests that high home prices are more supportable than 10 years ago."
Alaska is the state with the highest risk of home price declines in the next two years, with an index score of 27, followed by West Virginia and Connecticut at 19.
The other states in the top 10 at risk for a price drop are North Dakota, Texas, Wyoming, Colorado, Oklahoma, Mississippi and Idaho.
Connecticut made the list because the housing market is weak and it is a high-cost, high-tax state. Colorado and Idaho have home prices that are unusually high compared with historic values, the Arch report said.
All 10 of the metro areas most at risk for price drops are because home prices are far higher compared to historic norms, the report added. Among those cities, six are in Texas, including No. 1 Houston, No. 2 San Antonio, No. 5 El Paso, No. 6 McAllen, No. 7 Austin and No. 10 Dallas-Ft. Worth.
The remainder of the top 10 are the Connecticut cities of New Haven and Hartford at three and four, Portland, Ore., at eight and Boise, Idaho, at nine.