It has been a full year since our proprietary Real Estate Sentiment Index (RESI) first shared title agents’ predictions for price growth and other key metrics across property types for the year ahead. So, with a full year of data, the time is right to ask the question: how accurate is the wisdom of the crowd? In a post late last year, we discussed that the collective wisdom of the crowd, such as projections reported in the RESI, is often an accurate forecast – sometimes more accurate than the models economists build.
“We are proud to report that after analyzing a year of survey results, title agents’ projections were more accurate than many major economic forecasts. As Sir Francis Galton, a Victorian statistician, discovered over a century ago, the crowd will, on average, get the answer right – or at least very close to right.”
Looking back at the RESI third-quarter results from 2015, the crowd-sourced wisdom of title agents forecasted an expectation for residential price growth of 4.8 percent in the year ahead. At the time, Fannie Mae’s third-quarter forecast for that same measure was 4.0 percent. Freddie Mac’s was 4.1 percent and the Mortgage Bankers Association’s was 4.4 percent. Today, First American’s house price index estimates that house prices actually increased by approximately 5.1 percent. Keeping in mind that even our historical perspective on house prices is, in fact, an estimate, these results provide significant support for the crowd-sourced wisdom of title agents, which we report quarterly in the RESI.
So, what do title agents expect for price growth in the next 12 months? In this quarter’s RESI, title agents are forecasting residential price growth of 5 percent for the year ahead.
“When we started this survey it was with the belief that forecasts based on crowd-sourced conventional wisdom can provide useful insight,” said Fleming. “We are proud to report that after analyzing a year of survey results, title agents’ projections were more accurate than many major economic forecasts. As Sir Francis Galton, a Victorian statistician, discovered over a century ago, the crowd will, on average, get the answer right – or at least very close to right.”
With that in mind, we encourage you to browse the full results of the Q3 2016 First American Real Estate Sentiment Index.
Q3 2016 RESI Highlights include:
- Outlook for transaction volume positive: Overall, title agents remain optimistic about transaction volumes across all property and loan types, with a 7.2 percent increase in optimism over a year ago.
- Price growth optimism softens: Title agents’ confidence in price growth waned slightly from the past quarter, yet confidence was still strong for agents across all states, except those in New Mexico.