Last month WFG National Title Insurance Company hosted its Q3 Economic Outlook webinar, featuring WFG Chairman and Founder Patrick Stone alongside renowned economist Bill Conerly. The duo provided an in-depth analysis of the economy and real estate market, addressing key issues like inflation, housing inventory and affordability, regulatory pressures, and the future of the title insurance industry. Patrick Stone’s commentary offered strategic insights and a cautiously optimistic outlook, helping industry professionals navigate the current uncertainty.
Navigating Uncertainty in the Real Estate Industry
Patrick Stone opened the webinar by acknowledging the pervasive uncertainty that has gripped the real estate sector. “We are in an interesting period of transition,” he stated. “Virtually every component of the real estate industry is facing challenges.” Stone emphasized the complexity of the environment, calling out factors such as geopolitical tensions, inflation, and evolving technology. He also noted how the ongoing NAR commission lawsuit, which challenges the traditional real estate agent commission structure, could dramatically reshape the industry.
Stone delved into the historical context of real estate commissions, noting that changes over the years have mirrored broader industry transformations. "The average commission rate over the last 20 years has run pretty consistent between 5% and 6%. The question now is, will it drop because of the lawsuit?” he asked. He speculated that a reduction in the number of Realtors could be on the horizon, driven by the increased reliance on technology. “Right now, about 52% of people are finding the home they want on the internet, and only about 28% rely on a buyer’s agent,” he explained, indicating a potential decline in the agent pool.
For the title and mortgage industries, this shift could mean fewer referrals from real estate agents. Stone encouraged industry professionals to adapt to the changes. “Really look at your operations, start thinking about what you can do with technology, automation, and training to achieve more efficiency and be more successful,” he urged. The message was clear: Plan now for the inevitable changes that lie ahead.
The Growing Influence of Regulatory and Economic Shifts
In discussing regulatory pressures, Stone touched on the increasing interest in Attorney Opinion Letters (AOLs) and alternative title products on the part of government-sponsored entities (GSEs), a shift he is concerned about. He referenced Fannie Mae’s pilot program that could waive title insurance on certain refinance transactions, cautioning that these efforts, while politically motivated to reduce costs, overlook the risks that title insurance helps mitigate.
Stone highlighted the critical role title insurance plays in preventing fraud and forgery. "On average, one-third of title insurance losses stem from fraud or forgery, with our industry eliminating 75% of these risks,” he explained. "If you take that away, even on a limited segment of the market, you're still going to have a problem." Stone predicted that common sense would eventually prevail after a few incidents of fraud and forgery in a title-free environment.
A Surprising Market Turnaround
Amid the challenges, Stone presented surprising data that showed a notable upswing in real estate activity, defying seasonal trends. "At WFG, our resale orders are up 45% versus the first week of September last year,” he shared, adding that WFG’s National Title Services (NTS) also saw a 20% increase in orders from WFG’s title agents. He speculated that the boost could be due to an anticipated 1% reduction in mortgage rates, which would bring a flood of potential refinances into the market.
"If you lower mortgage rates by just 1%, you could potentially see about 7.2 million refis come into play," Stone said. "Even if only 3 million of those deals go through, that's still a substantial amount of business."
Stone also highlighted the growing affordability issue, which he connected to the significant fallout rates of lower-priced deals. “For deals under $500,000, we had a 33% cancellation rate," he noted. “But for transactions over $1.5 million, that rate drops to just 9.9%.” This led him to encourage title professionals to focus on higher-priced deals where the fallout rate is lower, increasing the likelihood of closed transactions and fewer wasted resources.
Commercial Real Estate: Reasons for Cautious Optimism
Shifting to the commercial real estate market, Stone provided a nuanced view. While office space remains a point of concern, with usage levels still below pre-pandemic levels, he expressed optimism about other commercial segments, particularly industrial properties and senior living facilities. "I’m cautiously optimistic that we won’t have a major calamity in office real estate," he shared, adding that foot traffic in offices nationwide had returned to 72% of July 2019 levels.
Stone’s assessment was supported by the relatively low commercial loan delinquency rate of 1.45%, which he believes bodes well for the broader commercial real estate market. He acknowledged ongoing concerns about refinancing challenges in the office sector but noted that most commercial real estate segments are faring better than expected.
Strategic Planning for the Future
As the conversation shifted to strategic planning, Stone stressed the importance of adapting to current market conditions by leveraging technology and boosting operational efficiency. He urged professionals to reassess their business models and focus on reducing costs. “Take some time to examine your operation," he advised. “Break it down by department, function, and client interface. Give everything a rating and be as honest as possible about where you stand.”
Stone’s advice also included a reminder to engage employees in the process. "I learn something every day by talking to employees at every level. When you bring them into the conversation, they can provide valuable insights about how processes work," he said. He also emphasized the importance of proactive planning. "If you wait until things happen, you’ll be reacting emotionally. But if you plan ahead, you can act decisively and unemotionally, which makes all the difference."
Looking forward, Stone shared his optimism for the future of the housing market. He projected that mortgage rates would likely fall below 6% by the end of the year, leading to a pickup in refinance activity. For 2025, he predicted a 25% increase in home sales as affordability improves, encouraging professionals to position themselves strategically to capitalize on this anticipated growth.
Final Thoughts: Plan for Efficiency and Embrace Technology
Patrick Stone’s message during WFG’s Q3 Economic Outlook was clear: The real estate industry is undergoing significant change, but with careful planning and a focus on technology and efficiency, title professionals can navigate the challenges ahead. "I think we are seeing a turn," Stone said, adding that he expects the industry to emerge stronger if professionals embrace change. "Be smart about your operations, reduce inefficiencies, and position yourself to thrive in the years to come."
For those looking to stay competitive, Stone's advice is simple: Plan now, focus on technology, and always seek efficiency.
Be sure to register today for WFG’s Q4 Economic Outlook webinar, which will take place on Tuesday, Dec. 3, at 1 p.m. ET/noon CT/10 a.m. PT via the following link: https://myhome.zoom.us/webinar/register/WN_7VSMLNW7RPCzopKd6SyalA#/registration. The video replay of WFG’s Q3 2024 Economic Outlook webinar is available here. You may also download the full transcript and talking point summary documents here.
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About Patrick Stone
Patrick Stone is Chairman and Founder of Williston Financial Group, the Portland, Oregon-based parent company of several national title insurance and settlement services providers, including WFG Lender Services and WFG National Title Insurance Company. Stone’s lengthy career in real estate and related services includes C-level positions with three public companies and serving as a director on two Fortune 500 boards. His senior executive management positions include nine years as president and COO of the nation’s largest title insurance company, chairman and co-CEO of a software company, and CEO of a real estate data and information company. Stone also served as vice-chairman of Metrocities Mortgage, a 2005 top-20 mortgage lender, and as chairman of The Stone Group, an Austin, Texas-based tenant-represented brokerage company. In 2013 Pat was named one of the “100 Most Influential People in Real Estate” by Inman News and as one of the “Top 101 Real Estate Industry Doers” in 2015 and again in 2021. Other accolades include receiving HousingWire’s coveted “Vanguard Award” in 2019 and again in 2021, Progress in Lending’s “Lending Luminary Award” in 2019, 2020, 2023 and 2024, Inman’s “Best of Finance” award in 2023 and 2024, and October Research’s annual “Leadership Award” in 2020.