Appraisals in 2024

[J Grant]

The boom in 2021-22 was a double-edged sword. Mortgage volume increased, but locked many borrowers into over-priced homes that they don't dare leave because they have interest rates half or less that of current rates and that means unless downsizing, your mortgage payments skyrocket. So, the end result was inflation big time. And that inflation started on Day One of the Biden administration and never let up until last year when interest rates increased. And so, many people would like to sell and move up or over to newer housing but cannot afford to. And may never be able to strictly due to home prices inflating so fast.

In 2022, NE Okla went flat for over a year, and now home prices are back to inflating at 4% annually. In NW Ark, growth is so rapid with Wal-Mart and Tyson's that they never knew home price inflation of less than 5% annually. Since 2021 we have some homes selling for 50% more than they were in 2020. Land prices have more than doubled in rural areas. We're talking 80-acre parcels selling for $1.5 million and bought by speculators and developers. Nothing was selling for more than $5,000 an acre for 40 or more acres until 2021. But as properties were scarce, developers feared having no land to develop.

If I read correctly, Waivers from FNMA and Freddy have varied between 24% to as high as 45% month to month. That's a lot.

Software and all the attendant programs used by residential appraisers to shave a few minutes off the appraisal time, have been offset by the cost thereof. That is, you are paying dearly for the savings.

During the 2008-11 "Great Recession", I and a number of appraisers on this site recommended appraisers expand their business to non-lender work. And I for one, was an advocate for using a narrative report rather than some generic form. To me, the reports simply look better. We get a number of posts about folks asking about IRS rules, etc. and this shows that some people are trying to expand business opportunities outside of lending. Keep at it. The less lender work you have, the steadier your income is, and the more you can refuse the lowball assignments. The more appraisers who refuse to work for $299 less fees, the more likely the AMCs will have to raise their ante.

Yep, exactly.

Austin is one of the 5 cities where home prices have fell the most. It was also a city where prices rose the fastest previously.


When 1 in 4 up to nearly 1 in 2 finances by F/F are waivers, I would argue that waivers (more so than hybrids) are a huge factor in reducing volume.

The reality is that there is a limited volume of non-lender work on the res side; -it is a false hope to keep telling people to expand out of mortgage lending work when the other available work is extremely limited for a res license. Estate sales, IRSm duvirce vakatuibs - use more AVM's or RE agent estimates now and the work that more complex litigation or ROW work goes to very experienced appraisers who have a track record in it or are MAI or SRA - the avg res appraiser might pick up minor fill in volume. from listings or an occasional estate - not enough for full-time income in the vast majority of cases.

 

[Terrel L. Shields]

it is a false hope to keep telling people to expand out of mortgage lending work when the other available work is extremely limited for a res license.

Then work towards your CG. And recently I called a guy north of Tulsa and asked if he was still in business. His license had dropped a few years ago. Turns out he started doing only evaluations (non-conforming work for banks below the de minimus.) He told me he had dropped his license to take care of his father in the last few years of his life and had done little work for 2 years. But because demand was so high for evaluations in his area (where a $400k + property is very scarce) he decided not to do certified work. So, no license, very little liability since these are in-house, and uses very rudimentary format to do the reports for about 75% of a regular fee. I haven't heard in a couple years what one of our local banks that use evaluations (unless the borrower requests a real appraisal) charges but the last time I heard it was around $250, but if you request a garden variety appraisal it is $650...roughly double what I used to charge them over10 years ago. So, 99% of their customers go with the evaluation.

Working independently or directly as an employee of a bank and doing evaluations would be a low stress level of work, probably keep you much busier thus a steady income. But getting the CG and doing apartments, etc. - you know the mostly simpler commercial assignments - would also defray the issue of putting all your eggs in a basket with a hole in the bottom...called "secondary market."

 

[Mark K]

...but of course, a volume lost to waivers/hybrids/CDC inspection will cut into that as well. The question will be how much....

How much? Quite a bit.

Lenders have realized that appraisals were/are unnecessary for low LTV loans and No-Cash-Out refi's and for borrowers with excellent credit scores and other substantial assets. I'd estimate that appraisal demand will fall 40-50% of the total number loans.

 

[George Hatch]

 

[George Hatch]

How much? Quite a bit.

Lenders have realized that appraisals were/are unnecessary for low LTV loans and No-Cash-Out refi's and for borrowers with excellent credit scores and other substantial assets. I'd estimate that appraisal demand will fall 40-50% of the total number loans.

Not just those. They'll probably become more prevalent among the high LTV loans as time progresses.

Meanwhile and according to AEI, GSE usage of waivers hasn't been extending into the higher LTV purchase or cash-out refi transactions so far. The table they have compiled is showing a whole lot of zeros. So how we go from zero purchases with high LTVs being funded without an appraisal to "inflated home prices" via waivers defies all reasonable explanation. That is, unless we want to attribute home inflation to the appraisers.

 

[Joe Flacco]

Look at the drop in big bank originations in 2013. That is when the non-banks took over.

 

[George Hatch]

^^^ Yeah, I'd like to see a breakdown on those other funding sources.

 

[J Grant]

Then work towards your CG. And recently I called a guy north of Tulsa and asked if he was still in business. His license had dropped a few years ago. Turns out he started doing only evaluations (non-conforming work for banks below the de minimus.) He told me he had dropped his license to take care of his father in the last few years of his life and had done little work for 2 years. But because demand was so high for evaluations in his area (where a $400k + property is very scarce) he decided not to do certified work. So, no license, very little liability since these are in-house, and uses very rudimentary format to do the reports for about 75% of a regular fee. I haven't heard in a couple years what one of our local banks that use evaluations (unless the borrower requests a real appraisal) charges but the last time I heard it was around $250, but if you request a garden variety appraisal it is $650...roughly double what I used to charge them over10 years ago. So, 99% of their customers go with the evaluation.

Working independently or directly as an employee of a bank and doing evaluations would be a low stress level of work, probably keep you much busier thus a steady income. But getting the CG and doing apartments, etc. - you know the mostly simpler commercial assignments - would also defray the issue of putting all your eggs in a basket with a hole in the bottom...called "secondary market."

I am too old, though if I were starting out, I 'd go for the CG- for appraisers over 50, it is not feasible for most (though go for it if anyone wants to, of course! ). In addition, it requires a college degree, which many res license people lack, and a considerable amount of time as an apprentice/getting the hours (if one can find a mentor ). It'd highly advise anyone considering an appraisal career to get a CG- fwiw
As far as evaluators, I am happy for your friend, but I am not aware of any mass hiring or a slew of opportunities—can't those banks just use an AVM?

I think for res appraising, people have to be realistic about the changes that have taken place over the past 5-10 years and that those changes have reached a tipping point wrt how much volume or income is affected. Like everyone else of course, I would like a few more years of decent volume with a rate cut but am prepared for it to be less than it needs to be for anything other than basic bill paying - will see - I have a handful of good clients but all it takes is for one or two formerly good clients to shift to mainly Waivers and it all changes.

I'm not trying to be Debbie Downer; I just don't see how it benefits people not to understand the realities and probabilities that exist or to be so silly to think a president caused it or can fix it. An array of influential, deep-pocket lenders, lenders, GSEs, AMCs, AVM companies, and others have been working toward this goal for over a decade - it is not just technology, it is a deliberate policy.

Nearly every former appraisal is replaced with some form of an alternate valuation - a Waiver, which uses an AVM and sometimes a CDC collection, a hybrid, a computer-assisted evaluation, etc. - which means there are still valuations being done; they just profit people other than the appraiser now.

 

[Cob]

Why?

Rents in the Austin area have been falling for a year

Since May 2023, the average monthly rent in the Austin area has declined. Prices are down 6% compared to this time last year.

www.kut.org

 

[Terrel L. Shields]

can't those banks just use an AVM?

No. They have to have an evaluation or an appraisal to make a loan. They can use an AVM to monitor its value later.