- The National Association of Realtors found in its Appraisal Trends Study that retiring appraisers and a dearth of new industry entrants could cause the appraiser shortage to get even worse.
- It said in a blog post that a combination of automation and training solutions are needed to combat the shortage.
If you slept through all of 2016, then you might have missed the news that there weren’t enough appraisers last year for the properties that needed appraising.
Between falling interest rates (and subsequent refinancing by homeowners) and a mostly-recovered housing market, appraisers were in hot demand and appraisals could take weeks to line up — in some parts of the country, appraisers were even able to charge a premium for timely work.
Now that mortgage rates are closer to 4 percent than 3 percent — and now that we’re a year further along in developing technology that could help with the intricacies of appraisal — do industry experts expect the shortage to continue, and just how bad do they think it could get?
The National Association of Realtors (NAR) released the Appraiser Trends Study in March of this year, and this week, NAR’s director of regional economics and housing finance, Ken Fears, wrote a blog post outlining how retiring appraisers could impact the shortage and the need to increase training new entrants.
“Even with high levels of automation of appraisals, there remains a need to increase training of new entrants to the appraisal industry,” Fears wrote.
The retirement problem: Training or automation?
NAR recruited licensed and certified appraisers (who were also NAR members) to participate in the survey; it received 2,248 responses, of which 2,116 respondents currently work in the field or have done so during the past year.
NAR found that, on average, respondents had been appraising properties for 21.7 years, and it also found that “a demographic wave of baby-boomer appraisers planned to retire in the not-so-distant future,” wrote Fears.
To make a gnarly problem even worse, NAR found in its trends study that appraisers today are not training new appraisers at the same rates they did in the past.
In his blog post, Fears noted that “neither expanded training of new entrants nor automation alone will solve anticipated growth in demand on the appraisal industry.”
“We have a demographic wave moving out; training is a problem; and we’re hearing about automation,” Fears told Inman. “So the question is, what’s going to be the solution? Can automation do it? Or do we need more training?”
Why are appraisers exiting the industry?
“Obviously, there was a lot of concern around regulation,” Fears told Inman. “It was affecting appraisers’ turnaround times, workloads, and expenses and fee income.”
However, although appraisers might complain about regulations, they typically aren’t leaving the industry for a new career because of them.
“We found that only about 10 percent of respondents indicated regulation was a dire concern,” Fears noted. “The other 90 percent were saying they were going to stick around — the problem is that the majority is retiring in 10 to 15 years.”
Fears also noted that because appraisal standards vary depending on the type of loan, appraisers with lots of jobs to choose from might start gravitating toward more standardized, conventional loans to make their days easier.
“One thing that was clear” from the trends study, he said, was that “when we talk about FHA, VA and USDA loans, there’s going to be a lot of demand for those going forward because of the large veteran population and changing demographics.”
“If we have fewer appraisers, their fees will rise and they will migrate to the more conventional, more standardized loans,” he explained. “You would expect some exacerbation of problems in that space, so we really need to solve those problems.”
‘We’re going to need a combination of solutions’
Over time, Fears said, “the demand for appraisals will rise” and, as a result, “we will need to grow our appraiser base.
“Automation can help augment that,” he added, “but automation still relies on appraisals — so we’ll still need a certain number of appraisers to create new appraisals.”
A sale or refinancing transaction can utilize a recent appraisal and use automation to update it, but that won’t work on rural properties or homes that haven’t “turned over” in a few decades.
He also said that the refinancing boom might taper off in the short term as rates rise, but the demand for appraisals is projected to continue to rise — and rise.
“The problem is that our population will continue to grow, which means that the total number of houses built — and new home sales and existing home sales — will rise. And at the same time, we know appraisers will start migrating out of the industry,” he explained. “As automation kicks off, that will help solve the problem as well. But over time, demand will overtake our ability to replace those appraisers.”