First American: Outlook Suggest Strong Spring Market
Continued good economic news, increasing Millennial demand and confidence that buyers will remain in market even if rates exceed 5 percent bode well for 2017 real estate, said First American Financial Corp., Santa Ana, Calif.
The company’s first quarter Real Estate Sentiment Index reported confidence for transaction volume growth over the next 12 months increased by 0.4 percent from the fourth quarter and increased by 0.63 percent compared to a year ago. Confidence for growth in purchase transaction volume over the next 12 months increased by 6.5 percent from the past quarter and by 3.7 percent from a year ago.
The index noted, however, that confidence in refinance transaction volume growth over the next 12 months declined by 5.7 percent from the fourth quarter and fell by 2.5 percent from a year ago. Prices across all property types are expected to grow by 2.5 percent over the next 12 months, up from last quarter’s expectation of a 1.7 percent increase.
First American Chief Economist Mark Fleming said the spring home buying season could feature some “bulls” and “bears.”
“Overall, bullishness about transaction volumes in the coming year increased, largely driven by the rise in purchase transaction expectations,” Fleming said. “Overall, year-end confidence in the healthy trajectory of the economy increased purchase transaction expectations, but the likelihood of higher mortgage rates further tempered refinance prospects.”
Fleming said the increase in overall transaction volume confidence this quarter suggests that title agents and real estate professionals feel the spring home buying season looks promising. “However, the positive outlook for purchase transactions stands in contrast to a further decline in expectations for refinance transactions over the next 12 months,” he said.
Other index findings:
–Multifamily property types show the smallest expectation for price growth, an increase of 0.40 percentage points since last quarter. Outlook for price growth for residential and industrial property types increased the most, by 1.28 and 0.84 percentage points respectively, quarter-over-quarter.
–States with the greatest increase in title agent and real estate professional confidence for residential purchase transaction volume growth as compared to a year ago: Louisiana (+53.1 percent), Mississippi (+35.6 percent), New Mexico (+33.0 percent), New Hampshire (+27.7 percent), and Idaho (+26.3 percent).
–States with the greatest increase in title agent and real estate professional confidence for multifamily purchase transaction volume growth as compared to a year ago: New Mexico (+50.0 percent), Idaho (+46.7 percent), Virginia (+43.1 percent), Arkansas (+40.0 percent), and Texas (+33.9 percent).
–States in which title agents and real estate professionals had the highest predictions for residential price growth in the coming year: New Mexico (+8.0 percent), South Carolina (+5.9 percent), Washington (+5.8 percent), Idaho (+5.4 percent), Tennessee (+5.4 percent).
–States in which title agents and real estate professionals had the highest predictions for multifamily property price growth in the coming year: Tennessee (+5.2 percent), New Mexico (+5.2 percent), South Carolina (+4.9 percent), Washington (+4.9 percent), and Alabama (+4.5 percent).
Fleming said the spring season should remain strong. “Hopefully, there will be enough supply,” he said.
