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Houston Has Highest Chance of Home Price Declines

As a whole, U.S. real estate has a low chance of experiencing a drop in prices. But energy-dependent areas are more vulnerable.

Across the entire country, there is a six percent likelihood that residential home prices will decline during the next two years.

While the national risk level is low, Energy Patch states — those dependent on coal, oil or natural gas — are at significantly more risk.

That is according to the Winter 2016 Housing and Mortgage Market Review published by Arch Mortgage Insurance Co.

“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 MI.

But DeFranco warns that Energy Patch states are at the greatest risk of experiencing declining prices as their economies contract as a result of the continued fallout from the large drop in coal, oil and natural gas prices.

Related: Oil slump weighing on housing markets in Texas, North Dakota

Crude oil exceeded $90 a barrel back in 2014, while it trades at less than $40 a barrel today.

Energy Patch states are “significantly more at risk as they continue to experience the fallout from large drops in energy prices,” the report states.

North Dakota, which has long ranked as a low-foreclosure state, has an Arch MI Risk Index of 46 — the worst of any state.

Up next was Wyoming, where the risk index was 37.

West Virginia and Alaska each had an index of 33, followed by New Mexico’s 31.

Although No. 8 Texas was not among the five-riskiest states — the five-worst metropolitan statistical areas were in the Lone Star State.

In the most-riskiest spot among the 50-most populated areas was the Houston MSA, where the index was an “elevated” 36.

No. 2 was split between the four MSAs of Austin, Dallas, Fort Worth and San Antonio — each with a “moderate” index of 26.

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