01.28.2017
Title Insurance and the 2017 Housing Market
2016 is drawing to a close, marking the end of a volatile year. Political and economic question marks at home and abroad kept the Federal Reserve from increasing interest rates four times on the year as planned – though they did increase rates from a range of 0.25 to 0.5 percent to a range of 0.5 to 0.75 percent on December 14th.
After nearly a decade of low interest rates, mortgage rates slipped into “historically low” territory over the past six months. The resulting spike in housing demand and home prices made for some of the housing market’s best months since before the housing market collapse. Now that rates are on the way back up, possibly as high as 4.5% by the close of 2017, experts are divided as to how the new environment will affect the housing market.
We’ll tell you what the experts say and what title insurance companies need to know heading into the unknown.
Rising Rates, Falling Volume?
It’s called “rate lock” – a term economists use for a sustained period of rising rates that leads homeowners with low mortgage rates to avoid selling and moving to bigger homes. In other words, they like their mortgage more than they dislike their current home. Rate lock leads to less mortgage volume, fewer sales, dropping demand and lower prices.
A Wider Net: How Title Insurance Companies Succeed with Low Volume
If this is indeed the reality, title companies will need to prepare for a low-volume environment in two ways: being frugal with labor costs and liberal with investments that increase volume. Rising rates and more homeowners staying put will mean less volume across the transaction spectrum, from purchases to refinances and everything in between. Title companies will need to cast as wide a net as possible by:
- Being able and ready to process all kinds of transactions – including REO sales, short sales, and investor bulk acquisitions
- Adopting flexible systems that can meet unique processing requirements of different states and counties
- Winning new clientele by responding rapidly to client requests and delivering on short turntimes
The Bullish Thesis and How to Prepare
Some market players aren’t convinced by the “rate lock” prediction, including the National Association of Realtors, the Mortgage Bankers Association, and mega-lenders Fannie Mae and Freddie Mac. They see the very same factors that gave the Fed the confidence to raise rates – low unemployment, rising wages – as so strong that they will overcome the downward pressure of higher rates and keep the housing market chugging along. Indeed the economy created an average of 188,000 jobs per month over the last year, and unemployment recently dropped to 4.6%, the lowest since August of 2007.
With those numbers in mind, the NAR predicts existing-home sales to eclipse increase from 5.8 million in 2016 to 6 million in 2017. The MBA sees 6.5 million, while both Fannie and Freddie predict 6.2 million. If this indeed in the case, the challenge for title insurance companies will not be casting a wider net. The challenge, like in 2016, will be staying compliant and staying on top of demand.
CPI Data: Outsourced Data Processing for the Title Insurance Industry
Regardless of which eventuality comes to pass, what is clear is that title and settlement companies positioned to gain market share in any environment are those that have embraced the latest technologies and implemented them into their workflow. In the title industry, technology is the great differentiator, and that will be more true in 2017 than years past.
CPI Data Services can help. Learn more by visiting our homepage.
