—Optimism also high regarding TRID preparedness, according to
first-ever First American Future Transaction Index says Chief Economist
Mark Fleming—
First
American Financial Corporation (NYSE: FAF), a leading
global provider of title insurance, settlement services and risk
solutions for real estate transactions, today released its inaugural Future
Transaction Index (FTI), which measures title agent sentiment on a
variety of key market metrics and industry issues, including
expectations for price changes across multiple property types, and
expectations for changes in volume for purchase and refinance
transactions. The FTI is based on a quarterly survey of title agents
that do business with First American. More than 1,100 title agents from
49 states responded to the initial survey, which was conducted in the
third quarter of 2015 and also measured title agent sentiment on the
impact of the TILA-RESPA Integrated Disclosure (TRID) rule.
Inaugural First American Future Transaction Index
The inaugural First American FTI found that title agent sentiment at a
state-by-state level for residential price increases is overwhelmingly
positive. Overall, title agents indicated they expect residential
property prices to increase by 7.7 percent on average over the next
year. Sentiment among title agents is similarly positive for price
increases over the next year for multi-family properties, but varies by
state for commercial property types (retail, office, and industrial).
Title agents also expressed broad-based confidence across all property
types in the outlook for growth in purchase transaction volumes over the
next year. The FTI value for residential purchase transactions was the
most positive at 56. Conversely, the outlook for refinance transaction
volume among title agents is consistently negative across all property
types.
Property Valuation Issues Expected to Become Leading Cause of
Cancellations
Another key metric the FTI measures is title agent sentiment on reasons
for title policy order cancellations. The FTI found that title agents
expect property valuation issues to be the most likely cause of title
order cancellation over the coming year, followed by a higher purchase
offer being received and unresolved title issues. Currently, title
agents ranked the inability of buyers to obtain a mortgage as the most
frequent cause of a title policy cancellation, but title agents expect
that to fall to the least frequent reason over the next year.
Expectations for title policy order cancellations overall in the coming
year are modestly positive with a FTI value of 11.
“By surveying title agents, the FTI produces a geographically diverse
and detailed pulse on the future of real estate markets across the
country,” said Mark Fleming, chief economist for First American. “We now
have a detailed picture of how confident these expert real estate
practitioners are about the current market, as well as where they expect
it to go in the coming year.”
3rd Quarter 2015 FTI Price Expectation
Highlights
-
Residential: The five states with the
highest expected residential price changes in the coming year are:
Virginia (+17.9 percent), Colorado (+12.1 percent), Texas (+12.0
percent), Florida (+10.1 percent) and Mississippi (+10.0 percent).
-
Multi-Family: The five states with the
highest expected multi-family price changes in the coming year are:
Colorado (+14.3 percent), Missouri (+11.2), Oklahoma (+10.1 percent),
Florida (+9.7 percent) and Rhode Island (+9.2 percent).
3rd Quarter FTI Title Policy Cancellation
Reason Highlights
-
The five states with the highest expectation for an increase
in cancellation rates are: New Mexico (42), New Jersey (35), New York
(35), Indiana (27) and Oklahoma (26).
-
The five states with the highest expectation for a decrease
in cancellation rates are: Michigan (-7), Colorado (-7), California
(-6), and South Carolina (-4) and Ohio (0).
TILA-RESPA Outlook: Title Agents are Strongly Optimistic
The inaugural FTI also measured title agents’ sentiment toward the
implementation of the TRID rule this October. Across all states,
respondents were optimistic, as opposed to pessimistic, and agents
strongly indicated that they believed this was much more than just a
simple change of forms.
“Possibly a sign of preparedness, title agents across the nation are
expressing a level of optimism regarding the implementation of the new
integrated disclosure forms this October,” said Fleming. “Title agents
expressed optimism in general, yet also indicated that they view TRID as
a dramatic change in the settlement process.”
Next Release
The next release of the First American Future Transaction Index will be
posted in December 2015.
Methodology
The First
American Future Transaction Index (FTI) is based on a quarterly
survey of title agents that do business with First American, providing a
unique gauge on the real estate market from the sentiment of real estate
experts. The FTI measures title agents’ expectations for changes in real
estate prices across multiple property types and expectations for
changes in the volume of purchase and refinance transactions. The FTI
also ranks the reasons for title order cancellations and gauges title
agent sentiment on important industry issues or events. Sentiment is
measured by asking respondents to answer questions on a scale of
negative, neutral or positive options. The FTI is calculated for each
question as the sum of the positive responses minus the sum of the
negative responses divided by the total number of responses, resulting
in an index that varies from -100 (all negative responses) to +100 (all
positive responses). Any FTI value above zero indicates increasing
positive sentiment and an FTI value below zero indicates increasing
negative sentiment. Results are only reported when a sufficient number
of survey responses are available to produce valid results. As the
survey is conducted in the coming year, an overall market-level FTI will
be created as the weighted combination of the underlying component
future transaction indices.
Disclaimer
Opinions, estimates, forecasts and other views contained in this page
are those of First American’s Chief Economist, do not necessarily
represent the views of First American or its management, should not be
construed as indicating First American’s business prospects or expected
results, and are subject to change without notice. Although the First
American Economics team attempts to provide reliable, useful
information, it does not guarantee that the information is accurate,
current or suitable for any particular purpose. © 2015 by First
American. Information from this page may be used with proper attribution.
About First American
First American Financial Corporation (NYSE: FAF) is a leading
provider of title insurance, settlement services and risk solutions for
real estate transactions that traces its heritage back to 1889. First
American also provides title plant management services; title and other
real property records and images; valuation products and services; home
warranty products; property and casualty insurance; and banking, trust
and investment advisory services. With revenues of $4.7 billion in 2014,
the company offers its products and services directly and through its
agents throughout the United States and abroad. More information about
the company can be found at www.firstam.com.
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