We’ve all heard of the appraiser shortage. Is this myth or fact? It depends. Trying to find the right balance of appraisers to feed the housing finance demand is always a tricky thing. Appraisers enjoy the so called “excess demand” days but most know all too well that these scenarios are often short lived. Lenders, on the other hand, view the appraisal as nothing more than speed bumps to loan closings.
Let’s look at the data for a minute. In the FHFA OIG Report, dated February 6, 2014, 52,000 appraisers delivered 747,000 appraisals to Fannie Mae through UCDP between January 28, 2013 and June 15, 2013. Those numbers are quite revealing. First it confirms the number of active appraisers in the conventional residential space. But what seems oddly out of whack is that the average number of appraisals, per appraiser, is 14.36 over less than 6 months. From the appraisers’ point of view I think they would be screaming “what shortage”!
What we don’t know from the data is how many appraisers are part-time. If a full time appraiser has an average capacity of 8 appraisals a week, those 52,000 appraisers could produce approximately 7 million appraisals.
There are a couple of very real problems. Bubbles, yes I mean real bubbles, are certainly occurring in some markets. Demand exceeds supply and pressure on turn times is very real. (I’d be willing to bet fees do not rise proportionately). Take a look at the chart below. These are the top 30 Statistical Market Areas in the US. I have compared the appraiser population in those SMAs to the general population.
Of note is that the supply/demand ratio in Atlanta at 60 appraisers per 100,000 is quite different than Cincinnati at 14 per 100,000. So the real answer lies truly depends on geography. In addition, not knowing how many appraisers are fulltime vs. part time is just half of the equation. How many are nearing retirement or just can’t make a living any longer at appraising and have exited the profession is another unknown.
We all know that predicting mortgage volume is not easy. Few predicted this current refinance trend to have lasted as long as it has. What is predictable and should have everyone concerned is the “graying” of the profession. The average age of the appraiser is 55 years old according to Clearbox statistics. I expect that is skewed younger due to the resistance of older appraisers to register online, especially as they are nearing the end of their careers. Marry those numbers with the length of time it takes to mint a new appraiser and you do indeed have a collision course ahead. I just don’t know when.
Economics cures a lot of woes. The current squeeze on the appraisers’ fee will certainly not entice appraisal firms to train the next generation. Nor will it attract enterprising young college graduates to the profession. These are fixes that can be set into motion now.
In summary it simply takes too long to become a producing appraiser. Given the education and necessary training there is a giant gap with other professions for potential income and career opportunities. That is a fact.
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