Strong Outlook for Refinance Transactions Drives 7.6 Percent Increase in Market Production Confidence, According To First American Real Estate Sentiment Index

Low rates fueled a dramatic 7.2 percent year-over-year increase in title agent optimism for overall transaction volume growth, largely driven by optimism for refinance transaction growth, says Chief Economist Mark Fleming

October 21, 2016, 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 announced that the First American Real Estate Sentiment Index (RESI) for the third quarter of 2016 found that market production, a leading indicator of market activity that combines title agents’ expectations for changes in both transaction volume and prices over the coming year, increased 7.6 percent this past quarter as compared with a year ago, a gain largely driven by the significant increase in the outlook for refinance transactions.

“By combining title agents’ outlook for transaction volume and prices, we can crowd-source the conventional wisdom of title agents and forecast the level of expected market production over the coming year. Generally, title agents are more confident in their expectations for the broader real estate market than they were a year ago,” said Mark Fleming, chief economist at First American. “The surprising continuation of low rates in 2016 dramatically increased confidence by title agents in the growth of refinance transaction volumes during the third quarter. Refinance confidence also offset expectations that purchase volumes will cool, when compared with title agent survey results from the second quarter. The result is a positive improvement in total market production over a year ago.”

The RESI is based on a quarterly survey of independent title agents and measures their sentiment on a variety of key market metrics and industry issues, including expectations for changes in purchase and refinance transaction volume and prices across multiple property types. In 2016, the survey has also tracked title agent sentiment regarding the implementation of the Know-Before-You-Owe rule, also referred to as the TILA-RESPA Integrated Disclosure (TRID) rule. More than 5,700 title agents from 50 states have participated in the first five editions of the quarterly survey. The 2016 third quarter survey was conducted in July 2016.

Title Agent Outlook for Transaction Volume Growth Trends Positive on Refinance Bullishness in Third Quarter

“Overall, title agents surveyed this quarter remain optimistic about transaction volumes across all property and loan types, with a 7.2 percent increase in optimism over a year ago. When considering refinance transaction volume growth for the year ahead across all property types, title agent optimism jumped 8.5 percent from the past quarter,” said Fleming. “With the drop in mortgage rates during the third quarter, it is not surprising that optimism for residential refinance transaction growth increased the most dramatically, up 46 percent over a year ago.

“While still optimistic, title agent confidence in purchase transaction growth across all property types declined almost 7 percent since last quarter’s survey and is down 4.2 percent from the same quarter last year. Nationally, expectations for residential purchase transactions, while still in optimistic territory at an index value of 62.3, declined the most among all property types at 8.8 percent quarter-over-quarter,” said Fleming.

Annual Growth 2016 RESI Volume Prediction Highlights

  • Residential: The five states with the greatest increase in title agent confidence for residential purchase transaction volume growth as compared with a year ago are: Rhode Island (+46.6 percent), Missouri (+40.3 percent), Washington (+35.1 percent), Colorado (+26.6 percent), and Virginia (+20.2).
  • Multi-Family: The five states with the greatest increase in title agent confidence for multi-family purchase transaction volume growth as compared with a year ago are: Rhode Island (+53.9 percent), Virginia (+37.2 percent), Arizona (+34.6 percent), Kentucky (+32.9 percent), and Oklahoma (+28.7 percent).

Title Agent Optimism for Price Growth Softens

“We found that while title agents’ confidence in price growth waned slightly from the past quarter, that confidence was still strong for agents from all states, except those in New Mexico, who expect declining prices. Confidence in retail and residential price growth declined the most, by 6 percent and 4.8 percent respectively, quarter-over-quarter,” said Fleming. Title agent confidence in multi-family price growth decreased the least at 0.2 percent nationally quarter-over-quarter. State by state, title agent outlook remained consistently positive for multi-family price growth, except within New Mexico.”

3rd Quarter 2016 RESI Price Prediction Highlights

  • Residential: The five states in which title agents had the highest predictions for residential price increases in the coming year are: Tennessee (+11.1 percent), Missouri (+9.7 percent), Oregon (+9.2 percent), Maine (+8.6 percent), and Washington (+7.7 percent).
  • Multi-Family: The five states in which title agents had the highest predictions for multi-family property price increases in the coming year are: Minnesota (+9.3 percent), Kentucky (+9.1 percent), Colorado (+8.4 percent), Tennessee (+8.3 percent), and Washington (+7.5 percent).

Know-Before-You-Owe Implementation Inconsistency Among Lenders Continues to Drive Title Agent Costs
“Title agents continue to report that their cost of closing a loan has increased, citing an average increase of $210 per transaction in the third quarter. However, they also note that the increases are not necessarily due to Know-Before-You-Owe directly, but a result of the varied approaches to rule implementation taken by lending institutions. These variances, they say, are forcing title agents to create different closing procedures for each lender with which they work, contributing to increased costs for title agents,” said Fleming. “The increase in cost per transaction differs dramatically by geography. In the third quarter, title agents in New York indicated the highest increase, at $539, while title agents in Oklahoma indicated the lowest increase at $25.

“Change continues to be difficult, and the implementation of the new Know-Before-You-Owe processes and forms was a challenge for title agents as well as lenders, requiring significant investments in new technology and time,” said Fleming. “The challenges caused by inconsistent implementation continue to burden title agents with increased costs that can vary substantially by geography.”

Next Release

The next release of the First American Real Estate Sentiment Index will be posted in December 2016.


The methodology statement for the First American Real Estate Sentiment Index is available at


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. © 2016 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 $5.2 billion in 2015, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2016, First American was recognized by Fortune® magazine as one of the 100 best companies to work for in America. More information about the company can be found at