First American: Optimism for Real Estate Transaction Growth Up Strongly in 2Q
First American Financial Corp., Santa Ana, Calif., said title agent expectations for growth in purchase and refinance transactions across all property types in the year ahead are 17.3 percent more positive than they were during the first quarter.
The company’s Real Estate Settlement Index for the second quarter said quarter over quarter, title agents’ confidence in purchase market growth increased 12.9 percent and 23.2 percent for refinance transactions. For real estate prices, title agents now predict 4.0 percent price growth over the next 12 months, a slight drop from the first-quarter prediction of 4.6 percent.
Overall, title agents are significantly more optimistic than last quarter about the volume of both purchase and refinance transactions in the year ahead,” said Mark Fleming, chief economist with First American. “For purchase transactions, title agents expressed broad-based confidence about the growth in volume across all property types over the next year.”
Fleming noted the outlook for refinance transaction volume among title agents is modestly positive, but much less so than for purchase volume. “However, this modestly bullish outlook is a significant change from the previous quarter, when title agents said they expected refinance volume to go down, possibly due to a reduced expectation of higher mortgage interest rates in the coming year.”
The report said states with the highest predictions for residential price increases in the coming year are Tennessee (+9.8 percent), Kentucky (+8.8 percent), Idaho (+8.7 percent), Wisconsin (+8.5 percent) and Utah (+8.0 percent).
The report also noted title agents are less likely to believe that the TILA/RESPA Integrated Disclosure rule (Know-Before-You-Owe) will cause closing delays during the spring home-buying season than they were in the first quarter. “Title agents still believe that Know-Before-You-Owe will cause delays, but that feeling has decreased by nearly 20 percent since the first quarter, which indicates the marketplace is adapting to the new process and forms,” Fleming said.
The report said title agents continue to report that their cost of closing a loan has increased, citing an average increase of $184 per transaction in the second quarter. However, they also note that the increases are not necessarily due to Know-Before-You-Owe directly, but a result of the varied approaches to rule implementation taken by lending institutions.
“These variances, they say, are forcing title agents to create different closing procedures for each lender with which they work, contributing to increased costs for title agents,” Fleming said. “The increase in cost per transaction due to this differs dramatically by geography.
