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While home prices have consistently been on the rise for quite some time, this upward trend could come to a screeching halt over the next two years—especially in energy-producing states.
States that produce coal, oil, or natural gas are significantly more at risk of experiencing home price declines compared to other areas. This is mostly attributable to falling energy prices.
Arch Mortgage Insurance Company's Winter 2016 Housing and Mortgage Market Review shows that home price decreases for the U.S. is only 6 percent over the next two years.
“Nationwide, the housing market is likely to strengthen over the coming year in spite of economic headwinds from a strong dollar and expected gradual rate increases by the Federal Reserve,” said Dr. Ralph G. DeFranco, Senior Director of Risk Analytics and Pricing at Arch Mortgage Insurance.
However, Dr. Defranco noted that this forecast is not one size fit all. Among the riskiest states are oil-producing North Dakota (46), Wyoming (37), West Virginia (33), Alaska (33), and New Mexico (31), with high Arch MI Risk Index values. These states "are at greatest risk of experiencing declining prices as their economies continue to slow due to continued fallout from the large drop in coal, oil and natural gas prices seen over the last year," he said. Oklahoma (28), Louisiana (28), and Texas (26) are also on this list of riskiest states for home price declines.
As oil prices continue to lower, employment is diminishing as well in these areas, even though home prices are rising.
“Apart from these few exceptions, national prices should rise faster than inflation over the coming years due to a number of strong fundamentals, including: a shortage of homes for sale or rent, better than average affordability, and continued job growth of 2 to 3 million jobs a year," Dr. DeFranco predicts.
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