The overall economy is expected to fare well in 2024 according to economists from across the spectrum. However, real estate sales will likely remain muted through much of the year due to low inventory and elevated interest rates.
An anticipated recession failed to materialize in 2023, and now the economy is predicted to experience a soft landing in Q1 2024. Goldman Sachs is especially optimistic, projecting U.S. GDP growth to hit 2.1% in 2024 compared to other economists who see growth in the 1-1.8% range for the year.
“It was fair to wonder last year whether labor market overheating and an at times unsettling high inflation mindset could be reversed painlessly,” said David Mericle, Goldman Sachs Research chief US economist, in a recent economic report. “But these problems now look largely solved, the conditions for inflation to return to target are in place, and the heaviest blows from monetary and fiscal tightening are well behind us.”
Joe Brusuelas, chief economist for RSM, a global network of independent assurance, tax and consulting firms, also sees a slow first quarter, followed by an uptick to 1.8% in the second half of 2024 and possibly accelerating into 2025.
“We expect that policy tailwinds from both the fiscal and monetary authorities will set the stage for strong productivity and growth in the years ahead as inflation eases back to a much more tolerable range,” Brusuelas said in his 2024 outlook report in the December edition of The Real Economy.
While all indications point to economic fundamentals being strong enough to keep the overall U.S. economy on stable ground in 2024, consumer confidence and real estate sales are likely to remain at a low ebb next year.
Looking at the economy through a consumer lens, The Conference Board is a bit more pessimistic, noting in its November forecast that the economy is likely to buckle early in the year, leading to a short and shallow recession.
“This outlook is associated with numerous factors, including elevated inflation, high interest rates, dissipating pandemic savings, rising consumer debt, and the resumption of mandatory student loan repayments,” they noted. “We forecast that real GDP will grow by 2.4% in 2023, and then fall to 0.8% in 2024.”
On the upside, consumer confidence was up 2.9% in November after three months of decline. The Conference Board Measure of CEO Confidence, however, fell to 46 in Q4 2023, down from 48 in the third quarter, as most business leaders are also anticipating a mild recession in early 2024.
Interest rates freeze real estate sales
With interest rates hovering in the 7.5-8% range as we bid goodbye to 2023, prospective homebuyers will continue to face a double conundrum in 2024:
- High interest rates have put many more available properties in the unaffordable range.
- Fewer homes are coming on the market as homeowners with low rates are staying put.
Some relief is on the horizon as homebuilders remain cautiously in the market to fill the supply gap. Many regions of the country are reporting strong new home sales, as homebuyers ready and willing to invest drift away from the paltry supply of existing homes to the new home market.
Freddie Mac statistics support this idea, with the GSE reporting that existing home sales were at their lowest level in 13 years in the month of September, but new home sales were showing remarkable resilience.
“New home sales have taken on increased importance for the housing market as the share of total home sales that are new increased to 16.1%, the highest share since 2005,” Freddie Mac reported. “The U.S. Census Bureau and U.S. Department of Housing and Urban Development reported that new home sales in September 2023 were at an annualized rate of 759,000, up 12.3% from August and 33.9% from September 2022. Overall, the inventory of new homes for sale has decreased 5.4% from last year.”
Fannie Mae sees existing home sales declining in the near term but surging again as 2024 progresses.
“Regardless of whether the economy manages a soft landing or enters a mild recession, the ESR Group forecasts mortgage rates in 2024 to retreat from their recent highs and average 6.8% by the fourth quarter,” Fannie Mae said in its November assessment. “As such, the ESR group expects home sales to begin to increase modestly over 2024 but to remain constrained by the likely persistence of the low supply of homes for sale.”
Navigating the market
Interest rates, while high, are not in uncharted territory and homebuyers in the past have learned how to navigate higher interest rates through a plethora of tactics.
Real estate agents and loan officers who are knowledgeable and consultative with their customers may help keep the market afloat in 2024 by assisting their prospective homebuyers with a range of options, such as:
- Backpedaling expectations towards more affordable homes.
- Encouraging buyers to increase downpayments to lower their monthly payments.
- Educating borrowers about alternative products such as adjustable-rate mortgages.
- Negotiating seller concessions.
- Working with homebuilders to moderate costs in new home construction.
Of course, none of these concessions makes up for lack of supply. Luring home sellers who are locked into mortgages in the 3-4% range back into the market is going to continue to be a challenge until overall rates begin to moderate, which by all predictions is unlikely to happen until the latter half of 2024.
Keeping an eye on fundamentals
As we enter 2024, it will be imperative for business owners to keep their eye on economic fundamentals both nationally and in their own market as they navigate a slower real estate market.
Although the job market has slowed in recent months, the outlook remains strong for stable employment in 2024, with some anticipation of a modest increase in unemployment. Regional variations are likely to have some impact on the real estate outlook in specific markets.
According to Goldman Sachs, real disposable income is forecast to grow nearly 3% in 2024. Solid job growth, real wage growth and an increase in interest income should keep consumer spending strong.
Higher interest rates are likely to take a toll on business investment, but if recessionary fears continue to abate, this may become a non-issue in 2024.
U.S. imports, which reached a zenith during the pandemic, have eased back in the past year. According to Goldman Sachs research, U.S. exports are expected to show some improvement in the coming year, as foreign economic growth accelerates, narrowing the trade deficit.
If interest rates begin to moderate in the latter part of 2024, real estate sales could improve under the strength of a wave of Millennials who are eager to move up to home ownership.
However, the specter of even a mild recession coupled with diminished consumer savings so necessary for a downpayment, growing credit card debt, lack of affordable housing, and high interest rates could delay a real estate market comeback well into 2025, especially for first-time homebuyers.
Navigating the complexities of our industry is indeed challenging, and it humbles me when independent agents confide in our team, sharing their concerns and ideas. One recurring issue you’ve brought to light centers around identity verification and the inherent risks involved in this key element of the transaction. I am delighted to announce that Alliant National has collaborated with Finigree, a leader in financial and payment technology solutions, and developed a robust identity verification system – SecureMyTransaction.
SecureMyTransaction is designed to equip you with the information you need about both buyers and sellers to advance your transactions with confidence. The technology applies a multi-factor identity verification process that cross-checks mobile device ownership and location, credit bureau information, bank account validation and ownership, payoff and proceeds verification, knowledge-based authentication, FinCEN and OFAC searches, along with Alliant National Underwriting Alerts.
With verified identity information at your fingertips, you’re empowered to protect against seller impersonation fraud, vacant property fraud, and deed and document forgeries. Scams like these can have profound consequences, including financial loss, reputational harm and regulatory sanctions. SecureMyTransaction is thoughtfully designed to help you mitigate these risks.
This solution – which is initially being offered exclusively to Alliant National agents nationwide – will be unveiled tomorrow at our annual Florida Seminar in Orlando. For those attending, we look forward to presenting this new tool to you and hearing your initial thoughts.
For those who will not be with us in Orlando, I hope you will take the opportunity to learn more about this solution built specifically for independent title professionals like you. You can visit SecureMyTransaction.com for details, or reach out to Alliant National’s Bob Grohol (BGrohol@AlliantNational.com, 440.228.0826) to schedule a demo.
As you familiarize yourself with this new tool, whether at the seminar or from afar, I invite you to share your thoughts and feedback. We have developed this system with you in mind, and your insights are invaluable to us. Please feel free to reach out to me, to Bob, or to any member of your Alliant National team.
Ever have a client who was sure their transaction had to be written on a large underwriter? Hey, I get it. Clients are sometimes drawn to the big title insurers, assuming that there are benefits to partnering with a large organization. They may feel a smaller underwriter won’t be able to meet their needs, and the deal is just too large or important to leave anything to chance.
As an independent title agent, you know the importance of selecting a trustworthy, reliable, and responsive partner to provide title insurance for your clients. In this blog, we’ll dive into the features that matter most when selecting an underwriter, debunk some common myths, and show why bigger isn’t necessarily better when selecting a title insurer. First, let’s consider some of the reasons a client might ask you to ensure a transaction with one of the big guys to see if that request aligns with their interests or if they are simply following a common myth.
If I go with a big underwriter, won’t I get better coverage?
There’s a common misconception that the product of the title insurer – the title policy and endorsements – often varies meaningfully in the terms and coverage between underwriters. It’s just not so.
The truth is that generally the product is the same regardless of who underwrites the policy. In states where the forms are promulgated by law, the insurance regulator determines for the entire industry what language is acceptable, and what terms and conditions will be incorporated into their contracts. In states where the forms are not promulgated, most insurers use either the American Land Title Association forms, or the California Land Title Association forms, with little variation.
Basically, the policy will be the same or similar regardless of the underwriter.
If I go with a big underwriter, won’t I get a better rate?
At first glance, this seems like a very reasonable question. In some industries, larger companies have a natural pricing advantage. But in title insurance, it’s hard for an underwriter, no matter how large, to distinguish itself on rates. In states where the rates are promulgated, the insurance regulator decides what to charge and all insurers must follow the regulator’s set rates. Even in those states where regulators do not mandate rates, there may be a ratings bureau that files rates on behalf of its member insurers – which means that most, if not all insurers, will be offering the same rates. And, in those states where insurers file their own rates, they are typically competitive and therefore very similar.
So, the rates will be the same or similar, regardless of the underwriter.
If I have a claim, won’t a big underwriter be in a better position to pay?
Again, this question seems reasonable. Title claims can run into the millions of dollars on commercial properties, so a client might think a big underwriter naturally has more resources to pay claims compared to a smaller underwriter. However, two broad factors level the playing field when it comes to paying claims: state regulation and reinsurance.
State regulators take great pains to protect the public by ensuring that title underwriters of all sizes have the resources to pay claims. Statutorily required reserves must be set aside to pay claims. Regulators carefully monitor the financial soundness of the insurers authorized to do business in their states, and title insurers submit both annual and quarterly financial statements. Title insurers have annual independent CPA audits and are subject to financial examination by the regulator, typically at least once every five years. This means that no matter the size of the insurer, there is a financial threshold that each insurer must meet to ensure its financial stability and continued operation. Moreover, many states have single risk limit formulas that cap the amount a title insurer may insure for a particular transaction risk without having to provide reinsurance.
When reinsurance is provided, there are essentially two insurers – the primary title insurer, and the reinsurer who stands behind the reinsured policy amount. So, while it’s true that a large title insurer may retain a larger dollar amount by itself as a single risk, a smaller title insurer utilizing reinsurance for that single risk is giving the insured two layers of financial security at no additional expense to the insured. A title insurer should be happy to provide you with information regarding its reinsurance, and as a customer or agent, you are entitled to ask for it.
At Alliant National, we reinsure high liability transactions up to $20 million with the Lloyd’s of London markets, and that’s one of the reasons we can confidently say: No title insurance underwriter can offer you better protection for your title risk than Alliant National.
So, if the policy and the price are similar, and the capability to pay claims is sound, what are the real differences between those big underwriters and a smaller underwriter like Alliant National? Moreover, what are the reasons a client might want to select Alliant National over a larger underwriter?
We Don’t Compete Against You For Customers
Alliant National does not compete against you for the customers in your market. Our sole focus is to support the independent title agent. Alliant National will never take a transaction or a customer from you. We strive to help you build better relationships with your customers, and to help you succeed.
Fast And Innovative Answers To Underwriting Questions
Underwriting delays put deals at risk. That’s bad for you and your clients. Sometimes big underwriters back-burner underwriting requests to service their company-owned title offices, and they sometimes provide “canned” or “by-the-book” responses when an underwriting challenge arises. Alliant National does not compete with its independent agents, so it’s able to put all of its underwriting resources to work for independent title agents and their clients. As a smaller underwriter, Alliant National also has the flexibility to find innovative solutions for you and your clients when underwriting challenges arise.
At larger underwriters, the agency and underwriting units can often be at odds with each other. There can also be communications breakdowns between corporate, regional, and state-based teams. At Alliant National, however, the absence of a multi-tier management structure gives our agency, underwriting and other teams the ability to work together closely and seamlessly. Everyone pulls in the same direction to deliver the best outcomes for our agents and their clients.
Real Service When Claims Emerge
We already discussed why the big underwriters generally are not “better” when it comes to the ability to pay claims. However, some big underwriters fall short when it comes to the claims process by making it seem like their goal is to pay no claims at all. At Alliant National, we have flipped the script when it comes to claims. We recognize that the claims department is where our title insurance product goes to work. We strive for timely and clear communication with insureds and agents, seeking first to understand the situation from all points of view. It’s a unique and collaborative approach to claims that agents and insureds value.
The Courage To Care When it comes to choosing an underwriter, it’s important to consider what really matters: finding a partner who prioritizes your needs and the needs of your clients. Unfortunately, larger underwriters may lack the flexibility and personal touch that independent agents and their clients require. Don’t get me wrong, there are a lot of great people working at large underwriters, but size can lead to conflicts, friction, and a lack of flexibility. At Alliant National, we pride ourselves on being able to deliver customized solutions that meet the goals of the real people behind each transaction. Whether it’s a multi-million-dollar commercial deal or a starter home for a young family, partnering with Alliant National means choosing a team that truly cares about you and your clients.
When you look at companies that have succeeded in turbulent times you, will find those that embrace strategic planning fare the best. Strategic planning is found to have a positive impact on organizational performance and is a must for enhancing an organization’s capacity to achieve its goals.
As a title professional, now may be a good time to review your strategic planning process and look for ways to improve it.
Before you begin, it’s important to realize what a strategic plan really is. A strategic plan is a complete and comprehensive activity. It is not document or slide presentation created at the beginning of the year and then tucked in a drawer. The steps of the strategic plan include selecting your team, analyzing current situations and considering future possibilities, defining objectives, creating the plan to realize the objectives, communicating and implementing the plan, and monitoring and adjusting the plan. As you see, “planning” is an important element of the strategic plan, but it’s certainly not the only element.
Here are some things to keep in mind while building and executing the various parts of your strategic plan.
Selecting your team
Be really honest about your team’s strengths and weaknesses, and where you might need to upgrade. An essential requirement for performing the strategic plan is to make sure the members of your team are up to the challenge – psychologically strong, honest, respectful of competitors, accountable, focused, principled and confident but not arrogant. Are their moods appropriate? Nothing thwarts a plan like negativity from a leader, and nothing helps motivate a team who can share their passion for the future of the organization. Ask yourself: do the members of your team embrace the importance of strategic planning, or do they think it’s a distraction from the “real work?” If you’re a business leader, it’s important to reinforce the importance of strategic planning, particularly in a challenging market environment.
Analyze current situations and future possibilities
The next step is to assess current situations and future possibilities both inside your business and outside in the market. The idea here is to ground your assessments about the current situation. Asking the question “where are we now?” is a way to think about this analysis. Internally consider your systems, procedures, and people. Look at your income and balance sheets, sales projections, customer satisfaction, market share and competitors. A SWOT analysis (Strength, Weakness, Opportunities, Threats) is commonly used. When you have considered the present circumstances and characteristics of your company, then move externally to review and write out your assumptions about customers, competitors, the market, and the economy. Try to stick to the facts and leave emotion and speculation out of your data gathering. As human beings, we have a habit of overestimating our capabilities, so it’s important to ground our assessments.
With your facts in hand from gathering data, now it is time to set objectives. Asking the question “where are we going?” is a common way to think about this phase. Consider the future you would like to see for your business. What are you hoping to produce at the end of the year, in 18 months, in two years? People tend to think in one, short time horizon, so it’s important to consider your objectives over multiple horizons of time. It may also be helpful to view your business objectives in light of your organization’s Mission, Vision, and Values.
One problem with many plans is that there are too many strategic objectives. Keep it simple and real. Get clear about what’s important and urgent and what is not. Of course, remember that people − real human beings − must perform your plan. Be realistic about what your team can do, and what they cannot do. Finally, do one last “gut check.” Ask yourself if your objectives are competitive enough. Said another way, will you be satisfied if you achieve your objectives? While it’s important to think simple, it’s also important not to think too small, particularly in a challenging market like we have now. You need objectives that will get the job done.
Strategies and tactics to realize objectives
Now it’s time to ask “how will we get there?” How will the objectives you have outlined be achieved? Consider the work your organization faces as you seek to convert on your objectives and make a plan specifying the members of your team who will do the work, by when, to what standard and how much you expect it to cost. It’s helpful to think in terms of SMART goals – Specific, Measurable, Achievable, Realistic, Timebound. After you have a rough plan, it’s important to try to pick it apart. To plan with confidence, it’s worth considering where the plan is most likely to break down. Some common flaws include poorly trained employees, poor data gathering and analysis, underestimating competitors, disregard for the importance of new tools and technology obligations, overestimation of sales skills (or other skills), and the lack of new products and services to keep up with change.
Communicating and implementing
When communicating your plan to the company at large, keep it simple, keep it SMART and make it important. Your plan has taken a lot of work and it represents a brighter, more successful future for your company. It’s a big deal, and it’s worth getting excited about. Your management team has a key role in holding the strategic objectives and tactical focuses outlined in your plan. Reinforce them. Be proud. Encourage your team to repeat over and over again what the team is doing and why. Use the same language, the same distinctions, the same graphs and charts. Communicate budgets, timelines, and what people are doing what. Honor their work by sharing key metrics and tell stories about milestones achieved. Hold regular meeting rhythms for key employees that focus on breaking down barriers and resolving issues that stand in the way of team goals.
Monitoring and adjusting
The final step in performing the strategic plan is to monitor, evaluate progress and adjust as needed. As a traveler checks the signs along a road while completing a journey, so to must we track progress toward our objectives. If you are a leader, it is important to maintain discipline and enthusiasm for the plan. Remember that adage that no plan survives first contact with reality, so adjust as needed, but … resist the temptation to trash your plan completely. On tough days that temptation may be strong, but remember the brighter future you and your team have envisioned. Keep progress moving toward your goals, even if you must take a step backward now and then. In closing, the strategic plan is a living and evolving set of commitments. Performing it requires continuous updates, interpretations and assessments of key metrics and situations. The more effective your practice of the strategic plan, the nimbler and more resilient your company will be; greatly enhancing your likelihood of success in these turbulent times.
Cyber criminals are busier than ever. Staying safe requires fraud awareness and the right business insurance coverages. Jerome Magana of SSIS Securance and Tom Weyant, Alliant National’s Risk Management & Data Privacy Officer, sit down to discuss the latest fraud trends and tips for making sure your businesses is positioned to recover in the event of a cyber fraud attack.