Looking forward to the state of title industry in the year ahead, we find that there are some significant trends that would change the way title business is conducted – primarily it will impact the lenders and real estate agents that title agents serve. Understanding these trends will allow any title executive to be better prepared for success in the year ahead.
According to Fitch Ratings; strengthening home price growth throughout the country would be a positive driver for the U.S. title insurers. The ratings for the industry, all in all, are expected to remain at current levels over the next 12-24 months.
Profit Margins: The profit margins in the title industry have been strong in the last three years. In 2016, the title segment pretax operating margins increased up to 10.5% and a year after that in 2017, margins increased up to 11%. In 2018, as per Fitch’s Outlook, the profit margins are expected to stay constant or it may drop to some extent.
Losses: Title industry universal loss ratios dropped by 4.3% in 2016 and 4.2% last year 2017. Even though this number keeps changing throughout the year, in 2018 the numbers are projected to be still near the 2017’s statistics. Therefore, the universal loss ratios are expected to remain at or near 4.3%.
Growth: Growth in the previous two years – 2016 & 2017 – remained sturdy for the title companies, due to the growth in home prices that moved up by 7% in Q3 of 2017 and before that in Q1, revenues scaled up by 3%. This was comparatively equal to the average annual growth rate for the last three consecutive years. Late in Q3 2017, the closed and open orders declined by 17% and 20% when compared with 2016 statistics. At the beginning of 2018, mortgage originations are projected to decrease and as a result the Title Industry would face a slow revenue growth potential.
In addition to these trends, the industry will still be subject to the drivers that have been present throughout the recovery. These include the need to ensure full compliance, the drive to cut costs (internally and for their customers), the pressure to recruit qualified staff and train them effectively, and the need to turn around work very quickly.
The good news is that a new study from TransUnion suggests that HELOC volume could spike by 30% in 2018, with 1.6 million new customers taking out loans within the next 12 months. More HELOC business means more business for title companies if they have the information lenders need to make fast decisions and close the deals before the consumer takes it elsewhere.
Therefore, we expect to see title companies providing more current owner searches and current lien searches in 2018. Most title companies will seek out partners like SLK Global Solutions for this work as they can better control costs when they outsource.
Let us know your thoughts on the above, and write to us at firstname.lastname@example.org to have a detailed discussion on how we can keep you abreast of the ever-changing title industry trends and grow in 2018.