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Nars "the Future Of Appraisal"

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gregb

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Thank Denis- (Partial Post of Article)

Demand for Appraisals

Demand for appraisals comes from the number of unique home sales and refinances. Nearly all home purchases, new or existing, require an appraisal. To forecast the volume of new and existing home sales, the number of households was forecast based on a 20-year projection from the Harvard Joint Center for Housing Studies[2] and augmented with the average growth rate from the Harvard study. Demand for both owner and renter occupied housing is correlated with household formation. The historic ratio of number of new and existing home sales to households in conjunction with the new forecast of households drove the forecast of new and existing home sales. Note that demand for both new and existing sales rise over time with population growth. The grey and green areas represent refinances and HELOC/improvement loans, which are assumed to decline and plateau going forward at a fixed share of purchase demand in a rising rate environment.[3] This assumption is an over simplification but represents a conservative estimate in that an increase in refinances from this assumption would create more demand for appraisers.



However, as evidenced by both Fannie Mae’s and Freddie Mac’s recent forays into automated appraisals, automation will have a significant impact on the industry. Public statements by Fannie Mae indicate that as much as 10 percent of refinance mortgage will be automated, but discussions with industry analysts and experts suggest that it could be higher, include purchase mortgages, and might someday include government-backed mortgages (FHA, VA, etc.). As depicted above, the green and yellow dashed lines represent total demand under different levels of automation, which subtracts from total demand. The different levels of automation are:

  • Baseline – 10% of all GSE refinance mortgages
  • Low GSE and FHA Automation – 20% of all GSE and FHA purchase and refinance mortgages
  • High GSE Automation – 50% of all GSE purchase and refinance mortgages
  • High GSE and FHA Automation – 50% of all GSE and FHA purchase and refinance mortgages
Furthermore, the GSE’s share of the market is assumed to moderate toward its historic norm of roughly 40 percent, while the FHA’s share moderates as well to 18 percent by unit volume. These latter assumptions could change with GSE reform, but lower shares would suggest lower take-up of automation and therefore more demand for appraisers’ services.

Supply vs. Demand: Defining Stress

In 2016, there were widespread anecdotes of appraiser shortages, delays, and “rush order” fees. As a result, the ratio of appraisals needed (e.g. new and existing sales with refinances) relative to the number of appraisers in 2016 was selected as the benchmark for stress as depicted by the pink dashed line in the chart below. An increase in the ratio suggests growing strain and a measure above the 180 average appraisals per appraiser indicates higher stress than in 2016. Four scenarios are depicted below each with a varying degree of automation as discussed earlier. In all periods there is a short-run improvement as automation takes hold followed by increasing stress as boomers exit the industry and population-driven housing demand continues to grow.



What if training improves? In the chart below, the same four scenarios of automation are depicted, but with a higher rate of new entrants to the appraisal field, 2,087 persons per year as in 2008. With this change each scenario improves and the time to return to or approach stress levels is postponed five to ten years. However, the stress levels are breached in each scenario except for “high GSE and FHA automation” for at least a year and under moderate levels of automation stress is maintained. Even under high levels of automation, the appraisals/appraiser ratio is elevated in the mid-term.



Appraisals: The Future is Mixed

While some have bet the future of the appraisal industry on automation others are less sanguine. This analysis suggests that even with high levels of automation of appraisals, there remains a need to increase training of new entrants to the appraisal industry. Furthermore, this analysis does not account for distortions within the industry such as factors that exacerbate the demand for FHA, VA, and rural appraisals. In a future of growing demand for and declining supply of appraisers, strain on these submarkets would likely outpace the general strain on the industry.
 

AMF13

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Oh C'mon. You know we need simple answers and fast conclusions. A quick fix!
Also cheap chicken sammiches from Mickey D. Sorry, JG. :leeann2:

In a future of growing demand for and declining supply of appraisers....

Whatever will we do? Economic theory says prices rise. :dancefool:
 

OSU Beavers

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As long as the bar is set high to keep the tattooed T-shirt & flipflop crowd that we saw in the early 2000's out and if appraiser trainees are not allowed to earn while they learn, then we will not see a "higher rate of training".

Even my kids say "**** that ****" when I ask them if they want to train. I am grossing over 90k a year, yet I can't seem to get ahead. My self-employed health insurance premiums are MORE than my house payment! And that is with going through the Oregon exchange!
 

NachoPerito

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Jul 25, 2012
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Interesting to show that only 34% of respondents to the survey completed 300 or more appraisals per year.

Another interesting note: Nearly two-thirds of respondents indicated that compensation was unchanged over the past 12 months. This is in contradiction to our market area in the State of Washington where fees have increased across the board.
 

TRESinc

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Ohio
My self-employed health insurance premiums are MORE than my house payment! And that is with going through the Oregon exchange!

no kidding. i'm in the same boat and it seems they find a way to increase it all the time - age, color of the sky that day, annual rate increase, you-went-to-the-doc increase, etc etc

Another interesting note: Nearly two-thirds of respondents indicated that compensation was unchanged over the past 12 months. This is in contradiction to our market area in the State of Washington where fees have increased across the board.

being in the COW states i am not surprised at that statement. come to ohio, land of the stagnant fees.
 

Highlander416

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Feb 16, 2003
Professional Status
Certified Residential Appraiser
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Massachusetts
An interesting read. I don't think we will see a ton of new entrants into the field. All the news is negative. Even this article by the NAR. If I were thinking about becoming an appraiser, I would move on from that idea after reading that article.

All the ideas about alternative tracks to certification, USPAP changes, use of trainees and so on all miss the mark.

People are not coming into the field because the perception is that appraisal work has a bleak future, offers very little stability, no benefits and low pay. The upside many people like is the self employment aspect. But, that only goes so far.
 

Mike Kennedy

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New York
Once Upon a Time in America there was a stalwart band of independent and objective professionals ethical lenders relied upon called Appraisers to tell them the Truth.........


crickets.....
 

Sid Holderly

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Certified Residential Appraiser
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Indiana
1 Appraisal a day is not possible in a rural area with all the stuff the AMC's, major banks, and mortgage co's want. I rarely have repetitive very similar asignments, no cookie cutters. Each one goes a differenct direction from my office. It often takes a half day just to drive the comps. Each appraisal has different assignment conditions and you spend more than an hour just meeting the changing requirements. AMC- a wants it a,b,c; AMC-b wants c,a,b; AMC -c wants specific language on line xx and only on line xx. If we could do all the appraisal for one set of requirements it would take much less time. Less than 20% of my appraisals go to the same entity.

For a recent appraisal, I was required to change one word on the last line of the middle paragraph on the third addenda page. These very picky reviews do not change the meaning or value, just use up time & thus the reason my fees are higher for non-local entities. That same wording has been in many other appraisals. Many AMC appraisals take up to a day longer than similar ones for a local bank.
 

Terrel L. Shields

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Arkansas
If I were thinking about becoming an appraiser, I would move on from that idea after reading that article.
Specialize in anything except residential. Condemnation, estate, agriculture, etc. Escape the form appraisal.
1 Appraisal a day is not possible in a rural area with all the stuff the AMC's, major banks, and mortgage co's want.
Exactly. And lenders want to pay the exact same fee for cookie cutters and complex properties and cannot apparently decide which is which.
If we could do all the appraisal for one set of requirements
I preached that for 20 years.
 
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