Independent title agents and real estate professionals are confident that transaction volume, purchase transactions, and refinance transactions will grow during the next 12 months, according to the second quarter Real Estate Sentiment Index (RESI) released Tuesday by the First American Financial Corporation.
The RESI, which polls industry professionals across the country to gain their unique insight about the future of the housing market, compiles data gathered each quarter to create a composite of national and region-specific information from those on the front lines of the industry.
In the realm of volume on a national scale, expectation in residential purchases rose from 71.57 to 77.98, or 8.96 percent from Q1 to Q2. Comparatively, that number is 6.25 percent lower than it was last year. Residential refinances also have higher sentiment than they did during Q1, rising from 39 to 45.76, a gain of 17.33 percent. Year-over-year, that number is down 24.06 percent.
There are states, however, in which industry professionals confidence in residential purchase transactions volume increased year-over-year. These states include: Louisiana (24.1 percent), Texas (15.6 percent), New York (12.9 percent), Missouri (11.4 percent), and Tennessee (9.7 percent).
Independent title agents and real estate professionals did not have quite as much confidence in the forecast for price growth. In Q1, 3.89 percent of those surveyed believed prices would increase in the coming year; and, in Q2, that number only rose to 4.19 percent. Five states in which professionals predicted the highest residential price increases were: Kentucky (8.6 percent), Washington (8.0 percent), Michigan (6.1 percent), Maryland (6.0 percent), and New York (5.8 percent).
The RESI also asked industry professionals about their experience working with first time homebuyers. According to those surveyed, 55.3 percent of first time home buyers were between the ages of 26-30, while 31.5 percent were from the ages of 31-35. Aged 36 and older only accounted for a combined 3.7 percent of first time home buyers, compared to 8.8 percent aged 21-25, indicating that a staggering majority are millennials.
Of those first time home buyers, 41.4 percent’s motivation for buying a home was financial investment. 25.2 percent cited having kids/starting a family, and 23.3 percent indicated their reason was due to acquiring a new job and/or receiving increased income. Only 10.0 percent said they wanted to buy a home because they got married.
According to First American Financial Corporation chief economist Mark Fleming, the obstacles to buying a home haven’t changed much.
“In contrast to the perception that Millennials are eschewing homeownership for the ease and flexibility of renting, this quarter’s survey provided more evidence that millennials are increasingly participating in the housing market … [l]ike generations before them, saving for the down payment is the biggest obstacle. When millennials buy a home may be different, but why Millennials buy homes is arguably the same as it’s always been.”
Thirty-seven-point-nine percent of people stated that saving the downpayment was the largest obstacle, with overall affordability being the second largest obstacle (30.8 percent), followed by a limited inventory of likable homes (19.0 percent), and limited access to credit (12.3 percent).
The First American Real Estate Sentiment Index (RESI) measures title agent sentiment on purchase and refinance transaction volume and price changes across multiple property types, as well as title agent sentiment on current industry issues. The RESI is calculated for each question as the sum of the positive responses minus the sum of the negative responses divided by two and times the total number of responses plus 50, resulting in an index that varies from 0 (all negative sentiment) to 50 (neutral sentiment) to 100 (all positive sentiment). A RESI value above 50 indicates increasingly positive sentiment and a RESI value below 50 indicates increasingly negative sentiment. Aggregated purchase and refinance sentiment indices are created by using a property-type, stock-weighted average of each underlying sentiment index.
The overall national sentiment index is a loan purpose market share-weighted average of the aggregate purchase and refinance sentiment indices. Aggregated national price expectations are property-type, state stock weighted. Results are only reported when a sufficient number of survey responses are available to produce valid results.