2004 was the year title companies came back to earth.
The pullback in home loan refinancing that began in 2003 played out the following year, ending a record run for title companies as well as others in residential real estate.
And a long bull-run in Orange County housing sales ended abruptly in summer as buyers reacted to price hikes. Still, the market here somewhat has recovered since then. Nationwide, brisk home sales still are the norm in many cities.
The county’s 15 largest title insurers handled $77.7 billion in OC transactions last year, a 17% decline from a year earlier, according to this week’s Business Journal list.
The total number of transactions handled by the insurers fell 32% to 221,560. OC employment fell 11% to an estimated 3,003 workers.
The list ranks title insurers by the dollar value of all local deals they insured. Volume data was provided by Anaheim-based First American Real Estate Solutions LP, a unit of Santa Ana-based First American Corp.
Nearly every company on the list did less volume in 2004 compared to the prior year. Individual declines ranged from 3% to 38%.
It’s not hard to find the culprit: the Federal Reserve. In 2003, the Fed ended its policy of lowering a key short-term rate to spur economic growth. That put the breaks on home loan refinancing. Refinancing boomed in prior years as rates fell.
Then in 2004 the Fed raised the federal funds rate five times. It also has raised the rate once this year to 2.5%.
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No. 2 First American’s Santa Ana headquarters: deal volume down 9% to $14.5 billion |
OC sales dramatically fell in July and August and then somewhat recovered. In January, sales of new and existing homes dipped 4.9% to 2,903 versus a year earlier, according to La Jolla-based market tracker DataQuick Information Systems.
Larry Buster, who heads First American’s operations in OC, said high home prices combined with expected interest rate hikes “made some people nervous” last year. He said buyers didn’t know if prices would keep rising, stay where they were or decline.
Despite everything, 2004 began strongly for title companies, Buster said. The dropoff in volume came in the past four to six months, he said.
Under Scrutiny
The industry also is facing increasing scrutiny from state officials here and elsewhere.
California Insurance Commissioner John Garamendi recently said he’s investigating the practice by title companies of paying lenders, agents and homebuilders for referrals.
First American last month said it would refund about $24 million to customers after state insurance investigators in Colorado claimed it gave kickbacks to such groups. First American said it would no longer pay for referrals.
Richmond, Va.-based LandAmerica Financial Group Inc. and Jacksonville, Fla.-based Fidelity National Financial Inc. also said they would no longer pay for referrals.
About The List
Fidelity again topped the list this year with $24 billion in transactions, down 20% from a year ago.
The Business Journal ranks title companies by their parent corporations.
With considerable industry consolidation during the past few years, the top five companies on the list are in part umbrella corporations. Fidelity, for example, controls Chicago Title Insurance Co. and Ticor Title Insurance Co.
No. 2 First American logged $14.5 billion in transactions, down 9% from a year ago. The company had the highest total of any single title brand but remained at No. 2, since No.1 Fidelity’s total includes its subsidiaries.
First American expanded its market share slightly to 16.7%. The company’s Buster said it gained from its relationship to builders. He said First American has about a 50% market share among OC’s builders.
For the most part, the title list is static.
LandAmerica Financial held its No. 3 spot with $12.7 billion. Its total was up 33% from a year earlier, thanks to its June acquisition of Southland Title Corp. in Irvine. LandAmerica also owns Lawyers Title Co., Commonwealth Land Title Co. and Gateway Title Co.
No. 4 Orange Coast Title Co. broke into the top five this year, moving up two spots despite a 5% decline in volume to $5.5 billion. The company controls California Title Co., which was one of the few brands to do more volume this year. Its $1.4 billion in transactions was up 13% from the prior year.
Rounding out the top five, Capital Title Group held its No. 5 spot with $5.3 billion in transactions, down 13% from a year earlier.
