Outlook for Real Estate Market Rises Despite Supply Constraints

First American Financial Corp., said confidence in transaction volume growth over the next 12 months increased by 0.5 percent from the third quarter and increased by 5.3 percent compared to a year ago.

The company’s quarterly Real Estate Sentiment Index also noted confidence in purchase transaction volume growth over the next 12 months decreased by 2.7 percent from the second quarter, but improved by 7.6 percent from a year ago. Confidence in refinance transaction volume growth over the next 12 months increased by 4.6 percent from last quarter and increased by 2.7 percent compared to a year ago.

The report said prices across all property types are expected to fall by 0.5 percentage points over the next 12 months compared to the second quarter.

“Optimism among title agents and real estate professionals increased this quarter, as they expressed confidence that transaction volume will grow in the coming year,” said First American Chief Economist Mark Fleming. “The increase in optimism was primarily driven by the rise in expectations among survey respondents for refinance volume growth, possibly indicating confidence that low rates will continue to benefit the real estate market. Supply-side challenges may be the reason for the decline in optimism for the residential purchase market.”

The report touched on the effectiveness of Fintech in home buying. Title agents and real estate professionals rated the technology as either very effective or somewhat effective:
–Online listings of properties in their market (85.2 percent)
–Mortgage calculators and financial planning (72.9 percent)
–Local market data such as market trends or crime statistics (59.4 percent)
–Online value estimates (56.8 percent)
–Educational Reference Materials (50.4 percent)

“Title agents and real estate professionals overwhelmingly rated online listings of properties in their markets as the most effective technology in preparing millennial home buyers for the purchase of their first home,” Fleming said. “Additionally, mortgage calculators and financial planning tools were deemed effective at helping borrowers better understand mortgage loans, while educational materials were deemed to be largely ineffective. Survey respondents’ ratings of online valuation tools were mixed, which may explain why approximately 60 percent believe that millennials have unrealistic expectations about home prices. Technology was deemed effective at helping home buyers more efficiently find a home to buy and determine how much they can reasonably afford to borrow, but less effective at setting appropriate expectations among millennials on home prices.”

Title agents and real estate professionals were also asked to rate how effective various technologies were in helping millennial home buyers close their real estate transactions:
–Loan approval applications/digital mortgages (62.4 percent)
–eSigning documents with an in-person notary (55.0 percent)
–Document preparation (48.0 percent)
–eSigning documents with online/remote/webcam notary (47.1 percent)

“Survey respondents saw clear value in automated loan approval and electronic data collection technology to facilitate the digital mortgage and reduce the burden of document signing. Interestingly, the difference in favorable responses to the two different forms of eSigning (in-person notary or online/remote/webcam notary) highlights the current debate over the role of a notary public in the closing process,” Fleming said.

Other report highlights:

–States with the greatest increase in title agent and real estate professional confidence in residential purchase transaction volume growth as compared with a year ago were Idaho (+42.9 percent), West Virginia (+40.0 percent), Ohio (+27.1 percent), Wisconsin (+19.8 percent) and Tennessee (+19.0 percent).

–States with the greatest increase in title agent and real estate professional confidence in multi-family purchase transaction volume growth as compared with a year ago: West Virginia (+103.6 percent), Idaho (+31.0 percent), Arizona (+26.7 percent), South Carolina (+17.9 percent) and Wisconsin (+15.6 percent).

–States in which title agents and real estate professionals had the highest predictions for residential price growth in the coming year:: Kentucky (+10.7 percent), Alabama (+7.1 percent), Maryland (+5.5 percent), Idaho (+5.4 percent) and Virginia (+5.1 percent).

–States in which title agents and real estate professionals had the highest predictions for multi-family property price growth in the coming year: Washington (+7.1 percent), New Jersey (+5.6 percent), New Mexico (+4.6 percent), California (+4.2 percent) and Maryland (+3.9 percent).