March 14, 2017, Santa Ana, Calif.
First American Financial Corporation (NYSE: FAF), a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, today released the First American's proprietary Real Estate Sentiment Index (RESI) for the first quarter of 2017. The RESI is based on a quarterly survey of independent title agents and other real estate professionals, providing a unique gauge on the real estate market using the crowd-sourced wisdom and expertise of real estate experts.
Overall, confidence for transaction volume growth over the next 12 months increased 0.4 percent from Q4 2016 and increased 0.63 percent compared with a year ago.
Confidence in refinance transaction volume growth over the next 12 months declined by 5.7 percent from last quarter and fell 2.5 percent compared with a year ago.
"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," said Fleming.
"Given the strong likelihood of rising mortgage rates in 2017, title agents and real estate professionals were asked to assess how sensitive they thought first-time homebuyers were to rising mortgage rates and at what rate they would withdraw from the market," said Fleming.
"Despite some regional disparities, title agents and real estate professionals do not expect increasing mortgage rates to have a significant impact on the housing market this spring. Continued good economic news, increasing Millennial demand and confidence that buyers will remain in the market even if rates exceed 5 percent bode well for 2017 real estate," said Fleming. "Hopefully, there will be enough supply.
"On a national level, title agents and real estate professionals said that the mortgage rate would need to hit 5.4 percent, 1.3 percent above the current rate, before homebuyers declined to enter the market. On a state-by-state level, title agents and real estate professionals viewed home buyers in Arkansas as the least sensitive, believing buyers would not leave the Arkansas market until rates hit 6.2 percent. North Dakota title agents and real estate professionals reported the lowest threshold rate for buyers to withdraw from the market at 4.5 percent," said Fleming. "Even with multiple expected rate increases by the Fed this year, most forecasts suggest mortgage rates will remain below 5 percent, so based on these results, the purchase demand this spring should not be materially impacted by any modest increase in mortgage rates.
"This remained true for Millennials and first-time homebuyer demand as 57 percent of the title agents and real estate professionals surveyed agreed that Millennial first-time homebuyer demand will rise regardless of a mortgage rate increase. On a regional level, title agents and real estate professionals in the Midwest were the most confident that first-time homebuyer demand will rise regardless of rate increases, said Fleming. "In contrast, the Northeast was the most pessimistic, with title agents and real estate professionals in New York, Vermont, Maine, Connecticut, and New Jersey on average disagreeing that first-time homebuyer demand will rise regardless of rate increases.
"When aggregated by state, title agent and real estate professional expectations for growth in residential purchase transactions remain positive in every state," said Fleming.
Residential: The five states with the greatest increase in title agent and real estate professional confidence for residential purchase transaction volume growth as compared with a year ago are: Louisiana (+53.1 percent), Mississippi (+35.6 percent), New Mexico (+33.0 percent), New Hampshire (+27.7 percent), and Idaho (+26.3 percent).
Multi-Family: The five states with the greatest increase in title agent and real estate professional confidence for multi-family purchase transaction volume growth as compared with a year ago are: New Mexico (+50.0 percent), Idaho (+46.7 percent), Virginia (+43.1 percent), Arkansas (+40.0 percent), and Texas (+33.9 percent).
Residential: The five states in which title agents and real estate professionals had the highest predictions for residential price growth in the coming year are: New Mexico (+8.0 percent), South Carolina (+5.9 percent), Washington (+5.8 percent), Idaho (+5.4 percent), Tennessee (+5.4 percent).
Multi-Family: The five states in which title agents and real estate professionals had the highest predictions for multi-family property price growth in the coming year are: Tennessee (+5.2 percent), New Mexico (+5.2 percent), South Carolina (+4.9 percent), Washington (+4.9 percent), and Alabama (+4.5 percent).
The next release of the First American Real Estate Sentiment Index will be posted in July 2017.