STC Stewart Information Services Corp.

Management Discussion

• Comparisons of our results of operations for the three and six months ended June 30, 2019 with the three and six months ended June 30, 2018 are set forth below. Factors contributing to fluctuations in the results of operations are presented in the order of their monetary significance, and we have quantified, when necessary, significant changes. Segment results are included in the discussions and, when relevant, are discussed separately.
• Our statements on home sales and loan activity are based on published industry data from sources including Fannie Mae, the National Association of Realtors® (NAR) and the U.S. Census Bureau. We also use information from our direct operations.
• Operating environment. Actual existing home sales in the second quarter 2019 declined approximately 3% from the second quarter 2018. June 2019 existing home sales totaled 527,000, which was down (seasonally-adjusted) 2% both from a year ago and from May 2019. June 2019 median home price was $285,700, an all-time high and 4% increase from June 2018, while June 2019 average home price was $321,600, a 3% increase from June 2018. June 2019 housing starts declined 1% compared to May 2019, but increased 6% from a year ago. Newly issued building permits in June 2019 were down 6% and 7% sequentially from May 2019 and from June 2018, respectively. According to Fannie Mae, one-to-four family residential lending in the second quarter 2019 totaled $498 billion, a 5% increase from the prior year quarter. This increase was primarily driven by $19 billion, or 15%, more refinancing originations in the second quarter 2019, compared to the second quarter 2018, as a result of the lower mortgage rate environment. Purchase originations declined $12 billion, or 3%, in the second quarter versus last year's quarter, primarily due to the moderate home price growth and lower inventories. Fannie Mae expects total origination volume to increase $134 billion, or 17%, in the second half of 2019, compared to the corresponding period in 2018, as refinancing activity is expected to continue improving, and new and existing home sales are expected to recover with increased home inventory and forecasted lower interest rates. The 30-year mortgage interest rate is expected to average 3.7% for the rest of 2019, after averaging 4.0% in the second quarter 2019.