The road to recovery. Covered in snow? Title insurance outlook for 2009

Snow has an unusual effect on business. Some businesses like ski resorts thrive, but few are unaffected. As I sit by the computer the New York metropolitan area is blanketed with snow, and I think about all the businesses that have been affected by the economic avalanche that buried the country in 2008. Wasn't it just yesterday that business was wonderful and the future looked rosy? One thing I know is that the cycle continues and as spring approaches, snow melts and brings forth spring flowers and greener grasses. We in the USA are a most resourceful society, and the greater New York metropolitan area may be the most resourceful area of all. As a society we will not only persevere and recover from this avalanche, but we will come out of it stronger than ever. So what does this weather report have to do with the title insurance business? Weather is cyclical and so is real estate and the economy in general. I can tell you from first-hand experience that both the residential and commercial markets have been buried in a deep snow for quite some time now. Now for the glimmer of good news. Spring is coming. Interest rates are extremely low and not surprisingly, residential homeowners are beginning to take advantage of the low rates. Residential homeowners with good credit and sufficient loan-to-value ratios are stepping in and refinancing. My own company has seen a significant spike in residential refinance activity over the past few months. Another glimmer of good news is that we expect this to carry on well into, if not throughout 2009. Possibly the largest looming question in title insurance is timing: "When will the commercial markets see significant activity again?" I believe most would agree that the commercial market will revive once the credit markets free up. Although President Obama and the most seasoned economists cannot predict when this will happen, I do believe it will happen sooner than later, and we will once again see an active commercial real estate market. What about the immediate future? Speaking to industry leaders, it is not difficult to realize that values of commercial real estate have corrected and are significantly lower. This naturally leads to the following conclusion. Overleveraged borrowers and owners soon will be forced to face foreclosure, negotiate deeds in lieu of foreclosure with their lenders, attempt to restructure their current financing, or in the alternative seek a distressed sale of the property to cash rich investors that do not require financial leverage. At National Land Tenure we are currently seeing these types of transactions cross our desk on a daily basis and any activity in the title insurance business is good activity. Although I believe that several Manhattan trophy properties will need to trade in order to set the value bar in our market, we are starting to see an increase in commercial distress activity. I expect this type of activity will predominate in the headlines in 2009. So I tell everyone in my line of business to hang in there. Sunnier days are ahead and once the real estate markets have stabilized, we will be busier than ever. In the meantime, help your neighbors shovel their driveways, give back to those suffering from the inevitable stress this economic downturn has placed on our society, and spend your days building your business for the future. You will not be sorry, as recovery is inevitable. Brian Fitzgerald is a vice president and counsel to National Land Tenure Company, LLC, Garden City, N.Y.