Let’s start by pointing out that the real estate market is like the weather. It is very localized. It changes like the seasons. And it can often be unpredictable. Stormy skies today may be sunny tomorrow. And just because it is raining in Houston doesn’t mean it is the same in Austin.
The year 2021 was an unexpectedly good one for the title industry. Historically low interest rates, a strong housing market, and hearty refinance numbers made for a positive year.
Higher Prices, Fewer Transactions
We’ve started 2022 with a record low inventory of homes for sale across North Texas. Consequently, we’re expecting fewer sales in 2022. Fewer real estate sales mean less business for the title industry.
With the rise in both home prices and interest rates, housing affordability is expected to worsen. As long as demand exceeds supply, 2022 will challenge potential home buyers. That makes this housing market very different than some of the booming seller’s markets we’ve seen in the past 20 years.
This year of high prices is not the real estate bubble the country experienced prior to the great recession of 2007-2009. There have not been a lot of subprime and risky mortgages issued in recent years. This market is a different situation because it is driven by supply and demand. Most homeowners currently have positive equity in their properties.
As mortgage rates rise, the refinance volume is expected to dip and provide less title insurance business in that sector as well. Refinance transactions typically account for at least 20 percent of annual title insurance volume. Industry experts from The Title Report indicate that refinance transactions could drop by 40 percent. That will depend on interest rates which are expected to slowly rise to about 3.6 percent on average by the end of the year.
Changes in The Title Industry
The title business has had to adapt to a lot of change — like most businesses in the last two years. The pandemic brought about a boom in remote signings and curbside closings. Record-setting volumes have combined have created their own challenges in this business that is highly regulated by the state.
This past year also saw a rise in financial scammers and security breaches. Additional security and advanced technology in the title world are expected to continue developing rapidly throughout 2022. Title companies will be expected to adapt quickly to the changing technology and additional requirements to challenge their expertise.
The consensus among industry experts is that while 2022 may not be as robust as the previous year, it should still be another good year for title volume. Confidence remains strong as we see what direction 2022 takes us.
