Supply constraints tempered real estate and title professionals' outlook for the home purchase market over the next year, according to First American Financial Corp.'s fourth quarter Real Estate Sentiment Index.
Their confidence in overall transaction volume growth for the next 12 months grew 5.3% from a year ago, and 0.5% from the previous quarter.
However, confidence in purchase transaction volume growth declined by 2.7% from last quarter, but is still up 7.6% year-over-over. For refinance transaction volume growth, confidence increased on both an annual and monthly basis, up 2.7% and 4.6%, respectively.
"The increase in optimism was primarily driven by the rise in expectations among survey respondents for refinance volume growth, possibly indicating confidence that low rates will continue to benefit the real estate market. Supply-side challenges may be the reason for the decline in optimism for the residential purchase market," said Mark Fleming, First American's chief economist, in a press release.
Title agents and real estate professionals expect prices of all property types to fall by 0.5 percentage points over the next 12 months.
As the industry moves to meet the technology expectations of millennial home buyers, survey respondents were questioned as to whether or not the digital investments are making a difference.
When asked if millennial home buyers are better prepared for the home buying process because of their access to real estate technology, about 48% of respondents claimed millennials are better prepared, while 34% believed they were not, said Fleming, explaining that "the results indicate this is a polarizing topic."
Last year, over $1 billion of venture capital was invested in real estate start-ups in 2016, and over $800 million was invested in the first three quarters of 2017, according to PitchBook data.