[January 10, 2019]

Arch MI's New Housing and Mortgage Market Review Makes 2019 Predictions on Pricing, Affordability and Where to Find the Hottest Markets

Expect home prices to increase in 2019, especially in the urban neighborhoods and "magnet cities" favored by Millennials, according to the Winter edition of The Housing and Mortgage Market Review (HaMMR), released today by Arch Mortgage Insurance Company ("Arch MI"). The national average home price is likely to increase 2-5 percent next year, worsening overall affordability, although some slow-growing markets will likely see price declines.

According to the HaMMR report, there's little chance of a housing bust because the typical warning signs of a widespread housing bubble are not evident.

"The housing market has gone from a full boil to a slow simmer, but it's nowhere near ice-cold," said Dr. Ralph G. DeFranco, Global Chief Economist for Arch Capital Services Inc. "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 new report also presents DeFranco's top five predictions for 2019 on pricing, credit risk and affordability, as well as a 2018 market recap and surprising new data on the impact of the housing bust on Millennial home ownership rates.

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 remains unusually low at 6 percent. 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 27 percent, followed by West Virginia and Connecticut, both at 19 percent. Among larger metros, Houston, Texas (20 percent), and San Antonio, Texas (20 percent), are the riskiest because their home prices are far higher than expected compared to the historical relationship between prices and incomes. Among the 10 cities most at risk of price declines, Portland, Oregon, saw the largest increase in risk because home prices there are much higher than expected, based on historical trends.

Commentary resources:

• The Housing and Mortgage Market Review is posted at archmi.com/hammr. The Winter 2019 edition summarizes current U.S. housing market conditions and focuses on trends in Millennials' home ownership rates.
• Dr. DeFranco will host a Housing Update webinar discussing market conditions and the details of HaMMR on Feb. 6 and 7. Registration is free at archmi.com/hammr.
• Detailed and interactive regional graphs and maps showing home prices are also available at archmi.com/hammr by clicking the View Our HPI (News - Alert) Charts and Maps 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.

ARCH MORTGAGE INSURANCE COMPANY | 230 NORTH ELM STREET GREENSBORO NC 27401 | ARCHMI.COM MCUS-B0853I-0119

© 2019 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20190110005365/en/

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