How can we fix the excess of appraisers?
Too many appraisers?
By George Dell, SRA, MAI
Easy — we do what we have always done, each time . . .
Excerpts: 1) We will raise the standards (“cost of entry”). 2) We will make it harder to become an appraiser; 3) Let the lower fees discourage newcomer appraisers.
In past issues of the Analogue Blog, we have considered the “five forces of friction” on the advancement of appraisal. Here we consider how these “frictions” will behave as appraisal demand has dropped, just as each of the five forces have found ways to reduce or “eliminate” the need for valuation expertise. Recall the five forces of friction: practices, standards, education, regulation, and client expectation.
This blog considers how each friction will respond to this “excess” of appraisers.
Practices:
Current practice is still embedded in the concepts of 8 ½ X 14 paper forms, spreadsheets, or narrative explanation of the opinion of the person (appraiser, evaluator) or automation programmer. Practices will continue to evolve toward objective data selection and predictive models. But this evolvement will continue to stay behind the inherent potential of applied data science. Habitual practice of “comparing comps” over “measuring markets” will prevail (in the absence of change in the other “frictions”).
To read more, click here
My comments: Of course, lots of politicians, appraiser organizations, appraisers and others are complaining now about an appraiser shortage and trying to recruit trainees. This is the past. Loan applications are way down, the lowest in 22 years. What was your business like before the pandemic? Not much work probably compared with 2020-2022. The Inevitable Cyclicality of Mortgage Lending. I hope you saved up lots of money over the past few years!
Non-lender Appraisals Good fees and few hassles
Purchase vs. refi appraisals
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NOTE: Please scroll down to read the other topics in this long blog post on declining mortgage loans, real estate market, unusual homes, mortgage origination stats, etc.
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Conch Shell House in Mexico on the island of Isla Mujeres
Excerpts: The owner of the house is Octavio Ocampo, a famous artist. The Conch Shell House was built using concrete and recycled and found materials. The interior of the house is also a reminder of a sea shell. The living room is round.
House decorating used a lot of seashells and items found on the local beach. The upstairs bathroom sink is made out of the base of a conch shell; the faucets are made of coral.
Construction started in 2001 and took three years to complete with two bedrooms, 2 bathrooms, and a swimming pool. Available to rent on Airbnb, of course.
To read more and see lots of photos, click here
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Be careful when you say “yes” to an appraisal request!
By Matt Simmons
Excerpts: Every appraisal starts with identifying the appraisal problem. Unfortunately, too many of us rush through that part thinking we know the answer, or worse, accepting that we’ll just figure it out as we go. To put it bluntly: if someone gives an address, asks for a fee, and you give it to them, you’re doing it wrong.
Every appraisal starts with identifying the appraisal problem. Unfortunately, too many of us rush through that part thinking we know the answer, or worse, accepting that we’ll just figure it out as we go. To put it bluntly: if someone gives an address, asks for a fee, and you give it to them, you’re doing it wrong.
To read more, click here
My comment: Good tips from USPAP and Real Life! This is very important for both lender and non-lender work.
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Thinking about doing non-lender appraisals?
I have been writing about it since 1992 and doing many types of non-lender appraisals since 1986
Articles available:
- Business slow? Non-lender appraisals are an excellent option! Good Fees, No AMCs, No CU, No UAD!
- Quick Start – how to get non-lender work ASAP
- Should you do lender work?
- Communicating with non-lender clients: Very, very different than lenders
- How to get referrals from real estate agents
- Estate/trust appraising Special Report – Good, steady business
To read more about non-lender appraisals, plus 2+ years of previous issues, subscribe to the paid Appraisal Today.
If this article helped you understand non-lender appraisals, it is worth the subscription price!!
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Hot housing market not a bubble, economists say
Jun 7, 2022
Excerpts: As home prices continue to break growth records, a panel of housing experts and economists surveyed by Zillow® does not believe the market is in a bubble. The latest Zillow Home Price Expectations Survey1 polled more than 100 experts from academia, government and the private sector to gather their opinions on the state of the housing market and future growth, inflation forecasts and recession risks.
“Americans have seen home values rise at record rates over the past few years. But although a recession is looking more and more likely, the housing market today is a far different beast than what we saw in the mid-2000s,” said Zillow economist Nicole Bachaud. “Unlike in 2006, this market is underpinned by strong fundamentals and has been built on mortgages with sound credit, factors that won’t change in the near term.”
The most popular reason for respondents rebuffing the bubble thesis is strong market fundamentals, including demographics, scarce inventory and shifting housing preferences. Low credit risks as a justification followed, due to sound loan underwriting and the overwhelming share of fixed-rate, fully amortized mortgages. Another large group of respondents reject the term “bubble,” which implies a subsequent crash that they do not believe is imminent.
Among those who do believe we’re in a bubble, unaffordable prices in the absence of record-low mortgage rates is the chief rationale.
The largest portion of the panel (45%) expects the next U.S. recession to begin in 2023, which gathered more votes than 2022 (30%), 2024 (8%) or 2025 and beyond (17%).
“Although the Great Recession was triggered by a housing crash, it’s an outlier in the grand history of recessions, which have often strengthened investment in housing due to its relative stability as an asset,” Bachaud said.
To read more click here
My comments: Worth reading. Well written and discusses different opinions. Of course, economist forecasts are often not accurate. Compiling and analyzing a lot of forecasts gives us some ideas. What is your forecast? I can’t decide!
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Home Above an Airplane Hangar in Texas
Excerpts: Hicks Airfield features a number of private airplane hangars, some of which were built simply for plane storage. Others, however, are completely livable dwellings.
It’s an airplane hangar, and it has an elevator that goes to a house—that really does look like a real house per the listing agent. The hangar was built in 2009, and the home was completed in 2014. 2,821 sq.ft.
To read more and see lots of photos, click here
My comment: Listed for $699,000. It never sold.
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Breaking Down the Multi-Decade Lows in Mortgage Applications – Lowest in 22 years
Excerpts: Mortgage applications hit the lowest levels in 22 years last week, according to the Mortgage Bankers Association (MBA). Loan originators who focus on the refinance market probably aren’t too surprised. Refi apps entered long-term low territory more than a month ago, and they’ve only been barely above the levels of 22 years ago since then.
The purchase market has been a different story. As recently as early May, we were still able to say that weekly purchase apps were higher than almost any other week before the pandemic going all the way back to 2010. They dropped substantially 4 weeks ago but held on to levels that were fairly central in the bigger picture for 3 straight weeks.
Wednesday’s update changes things. The drop in refi apps is ‘business as usual,’ but the drop in purchase apps was nearly as large as the big the one seen in early May. At this point, we’d have to go back to the purchase market doldrums of 2010-2015 to find anything lower (with a few exceptions).
There is more than one big problem at work here. The rate environment of 2020/2021 is the biggest problem because it cleared out a vast majority of refi potential from the market. It also inflated refi numbers relative to purchase numbers due to serial refinancing (something that occurred many times over the years as rates have essentially done nothing but move lower since 1980).
To read more and see more graphs, click here
Excellent analysis. Well written and short. The best I have seen.
My comments: Some appraisers doing lender work have lots of work and others have none, depending on location. But business will decline soon everywhere. I have followed the MBA loan applications data since it started in 1990 and included the data in this newsletter for many years. My monthly newsletter includes a graph of the previous few years.
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Note: I publish a graph of this data every month in my paid monthly newsletter, Appraisal Today. For more information or get a FREE sample issue go to https://www.appraisaltoday.com/products.htm or send an email to info@appraisaltoday.com . Or call 800-839-0227, MTW 7AM to noon, Pacific time.
My comments: Rates are going up. Mortgage loan apps are way down in many areas. If you’re busy now, make money while you can!!
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Mortgage applications index down to its lowest level in 22 years
Mortgage applications decreased 6.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 3, 2022. This week’s results include an adjustment for the Memorial Day holiday.
The Market Composite Index, a measure of mortgage loan application volume, decreased 6.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 17 percent compared with the previous week. The Refinance Index decreased 6 percent from the previous week and was 75 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 7 percent from one week earlier. The unadjusted Purchase Index decreased 18 percent compared with the previous week and was 21 percent lower than the same week one year ago.
“Weakness in both purchase and refinance applications pushed the market index down to its lowest level in 22 years. The 30-year fixed rate increased to 5.4 percent after three consecutive declines. While rates were still lower than they were four weeks ago, they remain high enough to still suppress refinance activity. Only government refinances saw a slight increase last week,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The purchase market has suffered from persistently low housing inventory and the jump in mortgage rates over the past months. These worsening affordability challenges have been particularly hard on prospective first-time buyers.”
The refinance share of mortgage activity increased to 32.2 percent of total applications from 31.5 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 8.2 percent of total applications.
The FHA share of total applications increased to 11.3 percent from 10.8 percent the week prior. The VA share of total applications increased to 11.4 percent from 10.2 percent the week prior. The USDA share of total applications remained unchanged at 0.5 percent the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.40 percent from 5.33 percent, with points increasing to 0.60 from 0.51 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $647,200) increased to 4.99 percent from 4.93 percent, with points increasing to 0.44 from 0.41 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 5.30 percent from 5.20 percent, with points increasing to 0.79 from 0.69 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 15-year fixed-rate mortgages increased to 4.62 percent from 4.59 percent, with points increasing to 0.65 from 0.63 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 5/1 ARMs increased to 4.51 percent from 4.46 percent, with points remaining at 0.68 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts. Base period and value for all indexes is March 16, 1990=100.
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Ann O’Rourke, MAI, SRA, MBA
Appraiser and Publisher Appraisal Today
1826 Clement Ave. Suite 203 Alameda, CA 94501
Phone 510-865-8041
Email ann@appraisaltoday.com
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