The HVCC will resullt in Oligopsony

[Mystery man3]

The HVCC will resullt in Oligopsony:

This mean few buyers many sellers and terrible consequences for appraisers:

Got the definition off wikipedia

http://en.wikipedia.org/wiki/Oligopsony


An oligopsony is a market form in which the number of buyers is small while the number of sellers in theory could be large. This typically happens in market for inputs where a small number of firms are competing to obtain factors of production. It contrasts with an oligopoly, where there are many buyers but just a few sellers. An oligopsony is a form of imperfect competition.

The terms monopoly (one seller), monopsony (one buyer), and bilateral monopoly have a similar relationship.

One example of an oligopsony in the world economy is cocoa, where three firms (Cargill, Archer Daniels Midland, and Callebaut) buy the vast majority of world cocoa bean production, mostly from small farmers in third-world countries. Likewise, American tobacco growers face an oligopsony of cigarette makers, where three companies (Altria, Brown & Williamson, and Lorillard Tobacco Company) buy almost 90% of all tobacco grown in the US.

In each of these cases, the buyers have a major advantage over the sellers. They can play off one supplier against another, thus lowering their costs. They can also dictate exact specifications to suppliers, for delivery schedules, quality, and (in the case of agricultural products) crop varieties. They also pass off much of the risks of overproduction, natural losses, and variations in cyclical demand to the suppliers.

 

[Kevin Mc]

Simple economics, supply and demand. How will the HVCC affect that?

 

[Mystery man3]

Why this is bad

Simple economics, supply and demand. How will the HVCC affect that?

There will be less buyers so buyers will have even more market control over fees which mean the sellers (appraisers) will be at a huge pricing disadvantage. Say good bye to $350 fees. Be afraid be very afraid.

 

[Kevin Mc]

I don't work for AMCs, never have,never will. AMCs control those who let themselves be controlled, no one else.

 

[TJSum]

Because of the current market conditions, the AMCs are calling all the shots. Mortgage Lending has always been feast or famine, when the worm turns they should lose much of their control. Why would an appraiser work for them when full fee work will be available, or at least the appraisers will work only for the higher fee AMCs.

I can understand why appraisers are working for them now, for many it is that or getting out of the business. What I never understood is why any appraiser with half a brain worked for them prior to 2006 when full fee work was readily available to anyone with a pulse. From 1998-2006 I was constantly turning down new full fee clients because I could not keep up with the ones I already had...

 

[Terrel L. Shields]

The function of the appraiser is to vet prices in a perfect stable and "rational" market. My interpretation of the Chicago school of economists suggests that all markets are "rational" and that irrational behavior (panic selling) is "normal" and a given in any commodity. Therefore, they don't believe that this current housing 'crunch' is really a market problem...or a oligopsony as you put it. The Chicago (aka Austrian) school preaches that in the long run the market knows best. And Keynes retorted, "In the long run, we'll all be dead." I am not a Keynesian but I see his point.
Our markets have never been true "free" markets. The government intervened by A-creating FHA, GSIs, tax rules that favor homeownership, etc. Thus, I do not believe the market can be truly rational.
If you believe our current market is over-reacting then the reverse is to simply reply that the bubble market created was an over-reaction, therefore, we are simply regressing to the mean and it is natural for that to over-shoot the mean and drive prices below their "intrinsic" value. So are we going to trail the markets down just as we trailed them up? (Positive economics) or try to predict where the market should be? It's a choice.

Our fees were, in effect, created by regulation in the early 1990's as FIRREA was implemented. It was regulation of the banks which gave us the power to dictate prices to banks. Without the government supporting us, it cannot happen. Like the stock analysts in the late 90's touting only the internet stocks their corporate bank employers were banking with, but claiming to be doing "independent" research on stocks, appraisers are the captive of the bank without government intervention.
Do you really think this will happen? I mean our Treasury Sec'y is Henry Paulson, ex-CEO of Goldman Sachs...think man, think...who do you think he's gonna look out for? Wall Street or You?

 

[Marcia Langley]

An oligopsony is a market form in which the number of buyers is small while the number of sellers in theory could be large.

This was already true before the HVCC was thought of. The buyers are the lenders and the volume is the number of appraisals they order. When the lender-buyers reduced their loan volume, the oversupply of appraiser-sellers increased. And as the number of lender-buyers became smaller, the oversupply of appraiser-sellers increased again.

AMCs and independent mortgage brokers are simply middlemen agents for the lender-buyers. They are not the buyers and their creation and prolifigation is and always has been at the pleasure of the lenders. The lenders created them as agents for handling their high volume and they are swiftly declining in numbers since the volume has gone into steep decline.

This elimination of MBs as middlemen has been a direct result of supply and demand for loan volume. The banks can and will and in fact are cutting the MBs out without a care about the HVCC and they have been doing so for over a year.

The HVCC does force some reform into the system but regarding MB middlemen it only formalizes what the banks are doing, anyway.

The AMCs are the lender-buyers' middlemen agents of choice. The HVCC does, in fact, put some restrictions on AMCs (and the lender-buyers) that would be benefitial to appraiser independence. But the overwhelming number of appraisers were only concerned with the single issue of preserving a status quo relationship with the disappearing MBs.

The HVCC does nothing to change supply and demand or the seller/buyer ratio. That disparity began widening long ago and has reached critical proportions.

The fact is that the mortgage industry needed large numbers of appraisers quickly. They got them but now they don't need them any more. The numbers of appraisers simply has to decline. Market forces will see to it.