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o r i g i nat i o n s e r v i c i n g a na ly t i c s s e c o n da r y M a r k e t ANALYTICS 52 | Th e M Rep o RT "This month's new-home sales report is consistent with other government data and rising builder confidence that indicate a continual recovery of the housing market." — David Crowe, NAHB chief economist THE LATEST Home Price declines less risky, except in oil-dependent states energy- and oil-producing states such as Texas, Louisiana, oklahoma, and West Virginia show higher-than-average risks of price declines t he average risk of home price declines over the next two years rests at the low level of 6 percent, except for states that are highly dependent on oil production, the Arch Mortgage Insurance (MI) Risk Index showed. Arch Mortgage Insurance Company, a provider of private mortgage insurance and a wholly owned subsidiary of Arch Capital Group Ltd., released its Fall 2015 Housing and Mortgage Market Review in October. The review contained the lat- est Arch MI Risk Index model results, which revealed that North Dakota had the highest risk of home price decreases at 43 percent, mostly due to the 1.8 percent drop in total employ- ment and lower oil prices. Alaska and Wyoming followed with 35 percent and 36 percent chances, respectively. In addition, energy-producing states such as Texas (29 percent), Louisiana (27 percent), New Mexico (25 percent), Oklahoma (26 percent), and West Virginia (5 percent) also have higher-than- average risks of price declines. "Home prices in much of the country should continue to rise faster than inflation in the medium term, due to a shortage of homes for sale or rent, good affordability, and continued job growth of 2 to 3 million net new jobs a year," the report noted. "Most Oil Patch states will experi- ence slower home price growth, but any price declines should be fairly limited in scope. No states received Risk Index scores above 50, the point where home prices are more likely to decline than rise." According to Arch MI, many oil-producing states have been experiencing slow home price growth. Texas home prices in- creased 7.5 percent in the last year, much quicker than the national average of 5.1 percent. "We expect the slowing trend to continue since there will be more energy-related layoffs to come (both directly and indirectly in manufacturing, transportation, etc.), due to long and uncertain lags and the recent continued declines in energy prices," the report stated. "Since the trend in employment has turned negative recently in several states, it is reasonable to expect a slowdown in home price growth in the oil region overall in the coming year," the report said. "We do not foresee a repeat of the 'Oil Patch' deep regional recession from the 1980s, thanks to a more diversified employment base, a well-capitalized financial sector, and the benefit of solid employ- ment growth for the United States overall." residential construction spending increases Residential construction spending is growing at a faster pace than nonresidential construction spending. t he U.S. Census Bureau reported in October that residential con- struction spending in- creased 0.7 percent in August to an estimated seasonally adjusted annual rate of $1,086.2 billion from the upwardly revised esti- mate of $1,079.1 billion in July. According to the bureau's report, construction spending is 13.7 percent above the August 2014 estimate of $955.0 billion. In the first eight months of 2015, construction spending totaled $683.4 billion, 9.8 percent above the $622.4 billion for the same period in 2014. The report showed spending on private construction was at a seasonally adjusted annual rate of $788.0 billion, 0.7 percent above the revised July estimate of $782.3 billion. Residential construction was at a seasonally adjusted annual rate of $383.3 billion in August, 1.3 per- cent above the revised July esti- mate of $378.5 billion. Meanwhile, nonresidential construction was at a seasonally adjusted annual rate of $404.7 billion in August, 0.2 percent above the revised July estimate of $403.8 billion. New single-family construction spending reached $218,828 million in August, up 0.7 percent from $217,265 million recorded in July, and up 14.0 percent from last August. The estimated seasonally adjusted annual rate of public construction spending was $298.2 billion in August, 0.5 percent above the revised July estimate of $296.8 billion, the report stated. Educational construction was at a seasonally adjusted annual rate of $67.4 billion, the Bureau reported. This is 0.2 percent below the revised July estimate of $67.5 billion. Highway construc- tion was at a seasonally adjusted annual rate of $90.4 billion, 0.4 percent below the revised July estimate of $90.7 billion.