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The probability that home prices will drop in the next two years fell again in the second quarter, reflecting increasingly stable market conditions, according to a measure released this week. Looking at economic and housing market indicators in the second quarter, Arch Mortgage Insurance Company says the odds of a decline in home prices in the next two years on the national level are 13 percent. That’s down from 15 percent in the company's summer estimate. Arch MI says the United States' current economic health puts the country's risk of future price decreases at a risk rating of minimal.
At the state level, only Florida, New Jersey, and New York fell into the moderate risk category, each posting index values above 25—meaning at least a 25 percent chance of price drops in those states in the coming years. The company explained those states are of the greatest concern due to higher-than-average mortgage delinquencies and generally weak economic conditions. Of the 50 most populated markets, four fall within the moderate risk category, including the New York metro, Detroit, and two in California.
Construction on new homes weakened in October, but the news wasn’t all bad. According to a report released by the Commerce Department, groundbreaking on new housing projects was at a seasonally adjusted annual rate of 1.01 million last month, a drop of nearly 3 percent from September's upwardly revised estimate. The overall decline stemmed from a plunge in apartment starts, which were estimated at a rate of 300 thousand compared to September's 335 thousand. Building on homes for individual families, on the other hand, strengthened considerably, climbing an adjusted pace of 696 thousand—the highest rate of building since last November.
