Mark Hughes: I think you just did editorialize.
Tony Park: We’re going to have us doing that.
Mark Hughes: That’s great.
Operator: Our next question is from John Campbell with Stephens Inc. Please go ahead.
John Campbell: Nice work in the quarter. No problem. On the October order count that was a clear positive in RI is just kind of across the board. It seems like things are turning ever so slightly, and that’s impressive given you’ve got obviously, the 8% backdrop with mortgage rates. Two-part question here. First, on the purchase side, I mean both you guys and First American are, I think, showing clearly better trends than what’s kind of been implied out there in the market, I mean, both from the industry forecasters and we look at the MBA weekly apps. I mean the thing there is that’s based on the number of mortgages, right? I saw this morning the stat that I think cash sales rose to like 34% of the mix. That was up versus 29% last year.
So I guess the question is, are you guys seeing maybe a little bit of deviations from what others might be seeing out there in the market due to rising cash flows? And if that’s the case, is there any meaningful impact to fee per file on the purchase side?
Mike Nolan: Yes. It’s a really good question, John. It’s Mike. I don’t know that we track cash sales specifically. It might be more anecdotally, and I think I’ve heard that maybe the field has been seeing a little bit more of that. But to your point, I mean, our October purchase orders fell 7% sequentially. And as I said in the opener, that’s very much a seasonal fall off. And — but then when you go back and look at what happened with rates in the third quarter, they were they went up, I don’t know, 60, 70, 80 basis points or something like that during that time frame. I fully expected more fall off, to be honest with you, given the rate movement. So, I think I agree with your premise that there’s a little maybe outperformance going on and maybe cash sales are an element of it, but I’m not sure of that.
Tony Park: Maybe I’ll just chime in on the fee per file. I think on the purchase side, we’re up about 3% versus Q3 of last year, which surprised me a little bit. I felt like it was trending down as you got into Q4 and the first quarter — fourth quarter of last year, the first quarter of this year, but then it started to tick right back up, probably surprised a lot of people that home prices have maintained their value. Maybe it came down a little bit sequentially from Q2 to Q3, but still holding up pretty well thus far.
John Campbell: Yes. It’s a great point. I mean I feel like for the last 1.5 years, 2 years, we’ve all been surprised kind of on the negative on the downside. So it’s good to see that these things are turning for sure. Refi to me, I mean, that’s obviously not even a meaningful driver anymore. So, I hesitate to even spend time on it. But I mean, the 2% sequential gain, that’s, again, against the backdrop of higher rates. I mean, are you guys feeling like — I mean, are you comfortable saying that we’re kind of at a true trough right now? And would you go as far as saying that any kind of slight reduction in rates could send us back to growth on refi?
Mike Nolan: I would tend to agree with that, John, if you look at our refi open orders. So we’ve averaged for the year. This is now through October on the open side, 1,012 a day. And we did 966 in October. I mean it’s been generally a straight line, right, Tony, across the year. And rates have moved around, as you know, quite a bit. So it does feel like we’re kind of at a floor. And to your comment about if rates come down, volumes go up, I think that’s absolutely true. It might take a little bit of time in that rates got to come down a certain amount to generate that refi opportunity. But you go back — I think I said this on the last call, the last time rates were 8% was 2,000. That was a very small refinance market, I think, $250 billion that year. And rates were 6% in ’03, and it was a $2.5 trillion refinance market. Now I’m not saying that will happen now, but I do think it points to how that refinance market can build over time with the drop in rates.
Tony Park: And in terms of revenue, refi as a percentage of our direct revenue is like 5% right now, and that’s been pretty consistent. It was 5% last quarter and 6% in Q1 and 6% in the fourth quarter. And 7% in the third quarter of last year and so, it’s just flat-lining at very low levels.
Operator: [Operator Instructions] Our next question is from Bose George with KBW. Please go ahead.
Bose George: Tony, I wanted to go back to your guidance on investment income. I mean, you noted that the 1031 balances are likely to moderate. I’m just wondering, is that volume-driven? Or are there other factors that caused that to moderate even if volumes are flat or it looks like maybe even starting to head back up.
Tony Park: Yes, it’s really more of a forecast than anything else. But just to be conservative, especially when we’re talking about trying to predict investment income for the next year. It’s the expectation that as regular order counts come down. On the title side, we would expect the 1031 accounts to come down as well. Balances have really held up very consistently all year long in the $4.5 billion range. And so that hasn’t changed yet. But we’re just anticipating that, that comes down. We earn about 400 basis points on those balances. And so, as they come down or if they come down, then you can see that, that comes down. And so, I would expect maybe a decline in quarterly income of maybe $10 million in — as we make our way into 2024.
Bose George: Okay. That’s helpful. Actually, can you remind me, what’s the split of the 1031 balances between residential and commercial?
Tony Park: That’s a good question. Mike, do you remember that? I — my recollection, it was more residential than I thought. I think in terms of — in terms of numbers, it was like 70% residential, but in terms of balances…
Mike Nolan: I don’t remember. I think we have to get back to you on that one. But we have the number, both, but I don’t have it handy.
Tony Park: Yes, I don’t either. It’s been a while probably been a year that you looked at it.
Mike Nolan: I would say this it’s probably more residential than you think in terms of the order flow.
Bose George: Okay. No, that’s helpful. And then just one broader question. Just with the recent lawsuits against the realtors and potential change in the commission structure there, especially for the buy-side agents. Just curious what your thoughts are about what that could do with the landscape there changes.
