First American Financial Corp., a global provider of title insurance, settlement services and risk solutions for real estate transactions, released First American’s proprietary Real Estate Sentiment Index (RESI) for the fourth quarter of 2016.
The RESI showed market production, an indicator of market activity combining title agents and real estate professionals’ expectations for changes in both transaction volume and prices over the coming year, decreased 3.8 percent this past quarter as compared with a year ago.
Overall, confidence for transaction volume growth over the next 12 months declined 11.8 percent from Q3 2016 and fell 3.8 percent compared with a year ago.
Confidence for growth in purchase transaction volume over the next 12 months remains positive, but declined 8 percent from last quarter and fell 8.8 percent compared with a year ago.
Confidence in refinance transaction volume growth over the next 12 months declined by 15.6 percent from last quarter, but is up 2.4 percent compared with a year ago.
Prices across all property types are expected to grow by 3.5 percent over the next 12 months, which is down from last quarter’s expectation of 4.1 percent.
“Overall, bullishness about transaction volumes in the coming year waned, largely driven by the decline in refinance transaction expectations,” First American Chief Economist Mark Fleming said in a press release. “Uncertainty leading into the election, as well as increasing confidence in the likelihood of Federal Reserve rate increases, tempered expectations for housing demand and lowered the overall price growth forecast.
“As the decline in overall confidence this quarter has shown, the uncertainty surrounding the presidential election can have an impact on expectations for the housing market,” he continued. “This survey of title agents and real estate professionals was conducted prior to the election, and survey participants were asked for their perspective on what the outcome of the election might mean for the housing market.” Based on the responses of title agents and real estate professionals and their relative preference for Donald Trump, it appears that the uncertainty created by increased regulation and the growing complexities of compliance have many title agents and real estate professionals believing that less regulation would be more beneficial to the housing market in the long run, the release stated.
In other words, to the extent that each candidate represents a differentiated perspective on the role of government and regulation in the housing industry, the title agents and real estate professionals surveyed felt less is more, according to Fleming.
“Now that Donald Trump is the president-elect and we have more political certainty, the message of title agents and real estate professionals to the new administration is: provide more regulatory and compliance certainty and the housing market will benefit,” Fleming said.
“When aggregated by state, title agent and real estate professional expectations for growth in residential purchase transactions remain positive in the vast majority of states,” said Fleming.
Only four states, Oregon, Kansas, Oklahoma and Alabama showed decreased title agent and real estate professional expectations for residential purchase transactions over the next 12 months.
- Residential: The five states with the greatest increase in confidence for residential purchase transaction volume growth as compared with a year ago are: West Virginia (+66.7 percent), Maine (+36.9 percent), Mississippi (+24.6 percent), Colorado (+19.3 percent) and Montana (+19.1).
- Multi-Family: The five states with the greatest increase in confidence for multi-family purchase transaction volume growth as compared with a year ago are: New Mexico (+27.3 percent), Ohio (+21.5 percent), Maine (+21.0 percent), West Virginia (+14.3 percent) and Indiana (+13.3 percent).
Fleming said price growth expectations were confined to two areas, according to the report.
“Industrial and retail property types were the only categories with increased price growth expectations for the next year,” Fleming said.
- Residential: The five states which had the highest predictions for residential price growth in the coming year are: Oklahoma (+12.4 percent), Maryland (+9.8 percent), Alabama (+9.8 percent), Illinois (+9.4 percent) and Kansas (+9.1 percent).
- Multi-Family: The five states which had the highest predictions for multi-family property price growth in the coming year are: New Jersey (+8.6 percent), New Hampshire (+7.8 percent), Washington (+7.4 percent), North Carolina (+5.1 percent) and Montana (+5.0 percent).