Real estate professionals are feeling less optimistic in the fourth quarter about the economy due rising interest rates, according to the Real Estate Sentiment Index from First American Financial Corp.
After raising rates in December, the Federal Reserve hinted that it could raise them several more times next year.
This in turn caused real estate professionals to lower their expectations for the housing industry in 2017, according to First American’s report.
“Overall, bullishness about transaction volumes in the coming year waned, largely driven by the decline in refinance transaction expectations,” First American Chief Economist Mark Fleming said. “Uncertainty leading into the election, as well as increasing confidence in the likelihood of Federal Reserve rate increases, tempered expectations for housing demand and lowered the overall price growth forecast.”
The title agents and real estate professionals surveyed answered that market production, which combines respondents’ answers on changes in transaction volume and prices over the next year, decreased by 3.8% annually in the fourth quarter.
Confidence over transaction volume over the next 12 months fell 11.8% from the third quarter and 3.8% from last year.
Similarly, confidence for growth in purchase transaction volume over the next 12 months also decreased by 8% from last quarter and 8.8% from last year.
Confidence in refinance transaction volume growth over the next 12 months decreased by 15.6% from last quarter, however it is still up 2.4% from last year.
Respondents expect home prices to continue rising, but at a slower pace than before. Prices across all property types are expected to grow by 3.5% over the next 12 months, down from last quarter’s growth expectations of 4.1%.
“Based on the responses of title agents and real estate professionals and their relative preference for Donald Trump, it appears that the uncertainty created by increased regulation and the growing complexities of compliance have many title agents and real estate professionals believing that less regulation would be more beneficial to the housing market in the long run,” Fleming said.
Now that President-Elect Donald Trump won the election, confidence among real estate professionals could take a turn for the better if it follows the same pattern as other surveys such as consumer confidence or home builder confidence.