The Next Real Estate Crisis (The Pending Appraiser Shortage)


No one can argue that a residential appraisal is of little importance. It’s the keystone to the mortgage industry and a product that takes time, training and experience to produce with any confidence.

No less important are the experienced, professional appraisers responsible for determining property values. But being important is no guarantee that an appraiser will be there when you need one.

That’s especially true today. The fact is we are on the verge of a major appraiser shortage unlike any I have seen in my 30 years in the business. At a time when the average age of today’s residential appraiser is in the late 50s and growing older, the total number of residential appraisers is falling even as mortgage origination volume grows.

shutterstock_258779678Unless this trend is stopped, the quality of appraisal values will eventually decline and public trust in the housing economy could once again fall apart.

Clearly something must be done. The Appraiser Qualifications Board (AQB), the leading body responsible for establishing credentials in our industry, agrees, and is proposing changes to its Property Appraiser Qualification Criteria.

These changes include eliminating the requirement for graduation from a four-year college and cutting in half the length of time a new professional needs to spend being mentored by a certified appraiser.

While these are necessary first steps, they only scratch the surface of what needs to be done.

I speak frequently with newly licensed appraisers, and I’m familiar with the hurdles they climb to break into the field. By far their biggest frustration is finding a committed mentor to work with them. Because most appraisers work alone, there is little motivation for an experienced appraiser to take on a mentee as they will more likely than not become a competitor.

Even if they were motivated, what time does a certified appraiser have to train someone? Appraisers in the majority of U.S. markets are stretched thin because of the ever-increasing demands being placed on them by their clients, who in turn are facing pressure from regulators and investors.

shutterstock_156241742Let’s suppose for a moment that certified appraisers had the time and desire to train new candidates. Is mentoring truly the best way to learn the business? This may seem a silly question, but the reality is that not all mentoring experiences are the same.

A mentor’s area of expertise and market can have huge impacts on the quality of training. I know appraisers who have spent years without seeing an oil-burning furnace or an example of inadequate off-street parking, both of which can impact value.

So what can be done? It is clear to me that a broad classroom experience that includes simulated lessons and perhaps even virtual reality can provide a more complete learning experience than the current, limited appraiser career path.

Similar tools can be found in the fields of commercial pilots and physicians—fields in which lives are at stake. More advanced medical programs and airline-training programs are investing in simulated learning environments, where trainees must successfully complete a series of training modules to show competency in a particular area.

The appraisal industry could adopt many of the same techniques—in fact, virtual reality and gaming systems can replicate almost every situation and experience an appraisal may confront on the job. Such training could incorporate real world scenarios, the latest technology tools and case studies designed to touch on primary appraisal principles and include frequent exams to test for proficiency.

I don’t mean to negate or downplay the role of mentoring. There is always value to gain from experienced professionals. But in our industry, the mentoring system is actually preventing qualified people from even considering an appraisal career. For our industry’s sake, we need new career options that are not only practical, but that also create stronger, better prepared appraisers—which will ultimately benefit us all.




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Americans To Spend $321 Billion On Home Improvement (and why it could be a disaster)



Home equity is back, and headed for the bathroom — or the kitchen or the garage or wherever today’s homeowners see the greatest returns.

Higher home prices have given people cash back and they are putting that cash to work in more — and bigger — remodeling projects.

Growth in home improvement and repair expenditures will reach 8 percent by the start of 2017, according to a new report from Harvard’s Joint Center for Housing. That is far beyond its 4.9 percent historical average.

shutterstock_283731104“By the middle of next year, the national remodeling market should be very close to a full recovery from its worst downturn on record,” said Abbe Will, research analyst in the remodeling futures program at the Joint Center. “Annual spending is set to reach $321 billion by then, which after adjusting for inflation is just shy of the previous peak set in 2006 before the housing crash.”

Increased home equity is certainly playing a large role, as are near-record low mortgage rates, which are enticing owners to refinance and potentially pull cash out. In the first quarter of this year alone, homeowners gained a collective $260 billion in additional home equity, thanks to higher home values, and with that increase, 38 million borrowers now have at least 20 percent equity in their homes, according to Black Knight Financial Services.

Confidence is also key. When people feel better about their home’s value, they are more apt to invest in it.

“I call it ‘nesting is investing.’ People are saying I want to do something that adds to the value of my house, and I’m just going to fortify the castle,” said Brad Hunter, chief economist with HomeAdvisor, an online home services marketplace.

And what fortifies the castle best? Kitchen and bath remodels are always popular, but Hunter points to less sexy insulation, as yielding the largest returns. He also said service requests on HomeAdvisor for multiroom remodels are up 67 percent from a year ago.

shutterstock_136231994“We could see percentage growth rates in the remodeling and home- improvement sector that exceed those for new home construction in the next few years,” Hunter said.

At least one-quarter of remodeling firms across all sectors report seeing more clients taking on multiple projects at the same time, according to another report from Houzz, also an online remodeling services firm.

Nesting is not the only thing driving home remodeling. As home sales pick up, they fuel fresh finishings as well. 

“As more homeowners are enticed to list their properties, we can expect increased remodeling and repair in preparation for sales, coupled with spending by the new owners who are looking to customize their homes to fit their needs,” said Chris Herbert, managing director of Harvard’s Joint Center.

No matter the reason, growth in remodeling is a boon to retailers like Home Depot, Lowes, Sherwin Williams and Masco — and of course their stocks. Consumers are not only doing more renovations, they’re spending more on them. With homebuilders still producing far fewer homes than are necessary to meet demand, owners of existing homes are trying to make them new again.




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