Our analysis in recent months has touched on the influence of uncertainty on our housing market. In particular, two significant events have influenced housing markets this past year. First, the Brexit benefit to the housing market triggered by the vote in the United Kingdom to leave the European Union this past summer. Second, and more recently, increased uncertainty over the presidential election results.
These events may be best seen in the U.S. stock market. All the leading indices were down dramatically in the last month and the Chicago Board Options Exchange (CBOE), a leading measure of stock market volatility, was up dramatically. Uncertainty over the outcome of an election, regardless of the winner, is bad for the economy.
In addition to the impact of uncertainty in the global economy, the housing market has also confronted uncertainty in recent years as new regulations have been implemented and the compliance environment has grown more complex. The most notable example, of course, is the implementation of the Know-Before-You-Owe closing regulations. In fact, while the time to close a loan has returned to pre-policy implementation levels, uncertainty still remains for title agents due to the different closing processes that lenders have established to comply with the regulation. According to our Real Estate Sentiment Survey (RESI), Know-Before-You-Owe has increased the cost for closing a loan to title agents because of the need to implement different closing processes for different lenders.
“Now that Donald Trump is the President-Elect and we have more political certainty, the message of title agents to the new administration is: provide more regulatory and compliance certainty and the housing market will benefit.”
The uncertainty surrounding our election is also an influence on the housing market. So, in our most recent survey of title agents, conducted over the past two weeks, we asked title agents for their perspective on what the outcome of the election might mean for the housing market:
With the presidential election just a few weeks away, we would like to know what impact you believe the outcome of the presidential election will have on the housing market over the next four years. Each candidate’s housing policies have the potential to impact the performance of the housing market. In your opinion, what will be the most likely impact of the policies of the four candidates below on the housing market over the next four years?
In the figure below, we’ve illustrated title agents’ responses to the question as a sentiment index. Judging by their responses and their preference for Donald Trump, it appears that the uncertainty created by the increased regulation and complexities of compliance have many title agents believing that the idea of less regulation would be more beneficial to the housing market in the long run. In other words, to the extent that each candidate represents a differentiated perspective on the role of government and regulation in the housing industry, our survey respondents feel less is more.
Nobody likes uncertainty, economically, politically, or otherwise. Now that Donald Trump is the President-Elect and we have more political certainty, the message of title agents to the new administration is: provide more regulatory and compliance certainty and the housing market will benefit.