5 Q1 Trends in The Title Industry You Should Know About
Buying a Home in 2018? Here’s What You Can Expect From the Title Industry
Few markets in the United States have been as volatile as the real estate market over the last decade. With many renters looking to make the move to home ownership this coming year, people are wondering what the market will hold for those who are interested in buying a home in the first quarter of 2018?
Here, we take a look at what the experts in the field are predicting for early 2018 and how it will impact you.
The Title Industry Is Expected to Remain Stable
As much as the housing market changes, in 2018, there don’t seem to be any new changes upcoming on the horizon. At least for the next 12 to 24 months, according to the latest Fitch Ratings Report. In the company’s Fitch 2018 Outlook: U.S. Title Insurance Industry, the report indicates that the “ratings for the industry, on balance, will remain at current levels over the next 12-24 months.”
Title profit margins have been strong for nearly three consecutive years, with 2018 expected to continue the trend. In 2017, the first nine months of the year saw title segment pretax operating margins increasing to 11 percent. The year prior, the margins increased by 10.5 percent. Fitch’s Outlook is predicting 2018 profit margins to either remain stable or to fall by a very small amount.
Title Universal Loss Ratios Will Hold Steady
In 2016, the title universal loss ratio fell to 4.3 percent; this was below the historical long-term average. Through the first nine months of 2017, the ratio dropped to 4.2 percent. While this number is known to fluctuate throughout the year, 2018’s title universal loss ratios are predicted to hold at or near 2017’s numbers.
Revenue Growth Expected to Slow
The last two years were very good for title companies, revenue-wise. Thanks to rising housing prices, which rose by 7 percent in September 2017, revenues were able to climb by 3 percent during the first nine months of 2017. This was on-par with the average annual growth rate of between 5 percent and 7 percent for the past three years.
But, things started turning around late in Q3 as closed and open orders dropped by 17 percent and 20 percent, respectively, in comparison with the year prior. Early 2018 is expected to see a decline in mortgage originations, which will ultimately slow revenue growth potential for the title industry.
What Does This Mean for the Home Buyer?
Regardless of the trends that may or may not impact the title industry at the start of 2018, your title company will still perform the functions you need it to, including searching for and reviewing titles, issuing title insurance policies on behalf of title insurance companies, facilitating closings, and filing and recording the paperwork associated with your home purchase.