The number of real estate appraisers is falling.

The number of real estate appraisers is falling. Here’s why you should care

 

The ranks of real estate appraisers stand to shrink substantially over the next five years, which could mean longer waits, higher fees and even lower-quality appraisals as more appraisers cross state lines to value properties.

There were 78,500 real estate appraisers working in the U.S. earlier this year, according to the Appraisal Institute, an industry organization, down 20% from 2007. That could fall another 3% each year for the next decade, according to the group. Much of the drop has been among residential, rather than commercial, appraisers.

Some say Americans are unlikely to feel the effects right now, as it’s mostly confined to rural areas and the number of appraisal certifications — many appraisers are licensed to work in multiple states — has held relatively steady. Others say it’s already happening, and rural areas are simply the start.

Since most residential mortgages require an appraiser to value a property before a sale closes, they say, a shortage of appraisers is potentially problematic — and expensive — for both home buyers, who rely on accurate valuations to ensure that they aren’t overpaying, and sellers, who can see deals fall through if appraisals come in low.

Read: 10 things real estate appraisers won’t tell you

“As an appraiser, I should be quiet about this shortage because it’s great for current business,” said Craig Steinley, who runs Steinley Real Estate Appraisals in Rapid City, S.D. But “what will undoubtedly happen, since the market can’t solve this problem by adding new appraisers, [is] it will solve the problem by doing fewer appraisals.”

A shrinking and aging pool

As appraiser numbers are falling, the pool is aging: Sixty-two percent of appraisers are 51 and older, according to the Appraisal Institute, while 24% are between 36 and 50. Only 13% are 35 or younger.

Industry experts blame an increasingly inhospitable career outlook. Financial institutions used to hire and train entry-level appraisers, but few do anymore, according to John Brenan, director of appraisal issues for the Appraisal Foundation, which sets national standards for real estate appraisers.

That has created a marketplace where current appraisers, mostly small businesses, are fearful of losing business or shrinking their own revenue as they approach retirement. Many have opted not to hire and train replacements.

Read: How to fight back against a low home appraisal

The requirements to become a certified residential appraiser have also increased over the past couple of decades. Before the early 1990s, a real estate license was often all that was needed. Today, classes and years of apprenticeship are required for certification.

And this year marked the first in which a four-year college degree was required for work as a certified residential appraiser. (It takes only two years of college to become licensed, but that limits the properties on which an appraiser can work. Some states, meanwhile, only offer full certification, not licensing.)

“If you come out of college with a finance degree, you can work for a bank for $70,000 [or] $80,000 a year with benefits,” said Appraisal Institute President Lance Coyle. “As a trainee, you might make $30,000 and get no benefits.” For some, especially those with student loans to pay, the choice may be easy.

“There were definitely easier options of career paths I could have chosen,” said Brooke Newstrom, 34, who became an apprentice for Steinley Real Estate Appraisals earlier this year. She networked for a year and a half, cold calling appraiser offices and attending professional conferences, before getting the job.

For residential appraisers, business isn’t as lucrative as it once was. Federal regulations in 2009 led to the rise of appraisal management companies, which act as a firewall between appraisers and lenders so appraisers can give an unbiased opinion of a home’s value.

But those companies take a chunk of the fee, cutting appraiser compensation. Some community lenders don’t use appraisal management companies, according to Coyle, but they are often used by mortgage brokers and large banks.

Appraiser numbers appear poised to continue shrinking, and as appraisers continue to get multiple state certifications they may be stretched more thinly, industry experts say.

For now, any shortages are likely regional, Brenan said. “There are certainly some parts of the country — and primarily some rural areas — where there aren’t as many appraisers available to perform certain assignments that there were in the past,” he said.

Elsewhere, however, the decrease in appraisers isn’t felt as acutely. In Chicago, according to appraiser John Tsiaousis, it may be difficult for young appraisers to break in but customers in search of one shouldn’t have a problem.

“I don’t believe they will allow us to run out of appraisers,” Tsiaousis said. “Some changes will be made [to the certification process]. When they will be made, I don’t know.”

Longer waits, more expensive appraisals, and quality questions

The effects of an appraiser shortage could be substantial for individuals on both sides of a real estate transaction, experts say.

Fewer appraisers means longer waits, which could hold up a closing. That delay means that borrowers might have to pay for longer mortgage rate locks, according to Sandra O’Connor, regional vice president for the National Association of Realtors. (Rate locks hold interest rates firm for set periods of time and are generally purchased after a buyer with initial approval for a loan finds a home she wants.)

Longer waits also affect sellers who need the equity from one sale to purchase their next home. When they can’t close on the home they’re selling, they can’t close on the one they’re buying.

A shortage also means appraisals will likely cost more, which some say is already happening in rural areas. Appraisal fees are generally paid by borrowers.

“Appraisal fees in areas where there aren’t enough appraisers are higher than those areas where there are plenty of people to take up the cause,” said Steinley, who holds leadership roles in the Appraisal Institute and the Association of Appraiser Regulatory Officials.

There is a quality issue, too: In some areas, appraisers come in from other states to value homes. While there are guidelines for these appraisers to become geographically competent, they could miss subtleties in the market, Coyle said.

Craig Steinley

Two appraisers appraising a home after a mold remediation. (Craig Steinley)

And if the shortage isn’t addressed, and lenders are unable to get appraisers to value homes, lenders might ask federal regulators to relax the rules governing when traditional appraisals are needed, allowing more computer-generated analyses in their place, according to Steinley.

Automated valuation models, which are less expensive and quicker, are rarely used for mortgage originations today, Coyle said. They’re sometimes used for portfolio analysis, or when a borrower needs to demonstrate 20% equity in order to stop paying for private mortgage insurance, he added. They might be used for low-risk home-equity loans, Brenan said.

Currently, appraisers are required for mortgages backed by the Federal Housing Administration, Fannie Mae and Freddie Mac. Those mortgages make up about 70% of the market by loan volume and 90% of the market by loan count, according to the Mortgage Bankers Association.

And computer-generated appraisals can’t match the precision of one conducted by someone who has seen the property, and knows the area, many in the industry say.

The industry is beginning to address the issue. Last month, the Appraisal Foundation’s qualifications board held a hearing to gather comments and suggestions, Brenan said.

One of the options being discussed: Creating a set of competency-based exams that could shorten the time people spend as trainees. That way, someone with a background in real estate finance could become certified more quickly, Steinley said. The board is also looking to further develop courses that would allow college students to gain practical experience before graduation, Brenan said.

Proper education is important “because real estate valuation is hard to do, and you need to get it right,” Coyle said. But the unintended consequences of the current qualifications are just too much, he added. “It’s almost as if you have some regulators trying to keep people out.”

As American homes get bigger, energy efficiency gains are wiped out

U.S. homes have become considerably more energy-efficient over the past four decades, according to government data. But homes also are a lot bigger than they used to be, and their growing girth wipes out nearly all the efficiency gains.

According to preliminary figures from the Department of Energy’s Office of Energy Efficiency and Renewable Energy, the average U.S. home used 101,800 British thermal units (Btu) of energy per square foot in 2012, the most recent year with available data. That’s 31% less than in 1970, after adjusting for weather effects and efficiency improvements in electricity generation.

And while the total number of housing units rose by 80% over the past four decades, collectively they used just 45% more Btu than in 1970. (The government uses Btu – the amount of heat needed to raise a pound of water 1 degree Fahrenheit – as a single common measure for electricity, heating fuel and other forms of household energy.)

All of this is good news for energy conservation. After all, a new Pew Research Center survey found that two-thirds of Americans say people will have to make major changes in the way they live to reduce the effects of global climate change. And many such changes can be made right at home.

But like Americans’ waistlines, U.S. homes have been expanding steadily over the years: The average home in 2012 was estimated at 1,864 square feet, 28% bigger than in 1970.

 

While some homeowners do add onto their existing structures, the trend is driven largely by new construction. According to the Census Bureau, the average new single-family house completed last year was 2,657 square feet – 57% larger than four decades earlier. While the biggest new homes are being built in the South (an average of 2,711 square feet last year), home sizes have grown the most in the Northeast: a 64% increase in average new-home size over the past four decades.

Today’s New Homes 60% Larger Than in 1973

What all of this means is that, after dropping sharply during the 1970s, the overall energy intensity of U.S. homes has changed little over the past three decades. Energy intensity is a metric that compares the amount of energy used against some unit of economic activity – households, in the case of the residential sector.

The average home used 183 million Btu in 1981 and 188.7 million in 2011; energy intensity did fall in 2012, to a preliminary read of 174.7 million Btu, but that was mainly due to weather. (Other factors, including geographic population shifts and changes in housing type, have had relatively little impact on overall energy intensity.) Think of someone scarfing down a chili cheeseburger and fries after an hour on the elliptical, and then wondering why he never seems to lose weight.

What has changed, though, is how households use energy. According to the Energy Department’s quadrennial Residential Energy Consumption Survey, in 1993 more than half (53.1%) of total household energy consumption went to heating living spaces, versus 41.5% in 2009 (those are the earliest and latest years, respectively, for which comparable data are available). Conversely, the share of energy consumption that goes to appliances, electronics and lighting rose from 24% to 34.6% over that same period. (The energy shares for water heating and air conditioning didn’t change much.)

Article By Drew Desilver published on http://www.pewresearch.org on November 9th 2015

USC has launched a Bachelor of Science in Real Estate Development

USC has launched a Bachelor of Science in Real Estate Development, the university announced Tuesday. The program, which comes 30 years after the school launched the Dollinger Master of Real Estate Development graduate program, already has over 80 students enrolled.

“This undergraduate program reaffirms our commitment to educating the next generation of leaders in the real estate industry,” said USC Price Dean Jack H. Knott in a statement. “With this degree, our goal is to produce students who understand the changing landscape of real estate and who are prepared to make an immediate contribution on their first day in the workforce.”

Sonia Savoulian, associate director for Price School programs in real estate, said she believed students from both programs could collaborate once they enter the workforce.

“Dollinger MRED graduates are going to go into the workforce and regularly need to hire young analysts,” Savoulian said in a statement. “We want to integrate student activity between the bachelor of science and master’s programs to begin building those relationships.”

In a statement on Tuesday, the university said that the undergraduate degree incorporates courses on real estate fundamentals, the development process, market analysis, finance and investment, the history of cities, and designing livable communities.

 

Article by : Natalie Schachar Tuesday, November 10, 2015 on LABusinessJournal.com

Real estate today: Older buyers, more bathrooms

After years of flunking, the American housing market finally merits a B+ grade.

Good news abounds: In August, new home sales are at their highest level since 2008. Homebuilder confidence is back to its best level in a decade and even mortgage applications are climbing again.

And data released Tuesday shows construction crews are starting on homes at the fastest pace since the recession.

Put all that together and the housing market is finally starting to be a real boost to the U.S. economy — and stock market — instead of a drag.

But today’s real estate market is a very different place than before the recession.

American home buyers are getting older and homes are getting bigger.

Related: Warren Buffett’s top stocks are dogs this year

The median age of a homebuyer has gone from 35 to 43

The median age of a homebuyer in 1985 was 35.

When the housing boom was nearing its peak in 2005, the median homebuyer’s age was 39. Now it’s 43, according to U.S. Census data.

“We consistently tell that story of people delaying homeownership,” says Skylar Olsen, senior economist at Zillow. “People are delaying things that pre-date homeownership — like getting married later and having children later.”

homebuyers median age

 

Homes are getting bigger

Homebuilders are catering to more middle aged buyers by building larger homes.

Since 2000, the typical American home for sale had about 1,800 square feet. That’s remained fairly steady over time.

But new homes that are just being built typically have 2,200 square feet, according to an analysis by the National Association of Home Builders. Potential homebuyers say they want a place that is at least that large.

So what’s going into all that extra space?

More bathrooms.

“Builders are adding more bathrooms. You want a little bit more privacy,” says Olsen.

Multi-family homes are also booming as people buy homes as investment properties to rent out. In the late 1980s, people would rent for four years before purchasing their first home. Now it’s at least six years.

Large homes often translate to more money for builders. No wonder the stock market funds that track homebuilders are soaring this year.

The iShares U.S. Home Construction ETF (ITB), SPDR S&P Homebuilders ETF (XHB) and iShares Residential Real Estate Capped ETF (REZ) are all up about 6% or more in 2015. That’s much better than the overall stock market, which is negative for the year.

Related: No one believes China’s growth, but…

Student debt doesn’t explain housing trends

The other common explanation for this big shift in American real estate is that young people have too much debt to buy homes, especially from student loans.

But economists at Zillow took a look at the probability that someone would buy a home if they have zero debt all the way up to $50,000 in student loans.

They found that higher student debt had almost no impact on the decision to buy a home.

Banks were very willing to lend to young people who had bachelor’s degree or higher, a recognition that these people would be likely to earn good salaries and pay off their loans.

The one exception was people who earned only an associate’s degree. There was a 75% chance of buying a home if they had no student debt.

But that fell to less than 60% chance of purchasing property if they had $50,000 in loans.

It’s an economic reality that workers with at least a bachelor’s degree now earn about $65,000 on average a year, compared to less than $50,000 a year for those with only an associate’s degree.

Related: Great Depression: 170,000 incredible images now online

CNNMoney (New York) October 21, 2015: 5:12 AM ET

In upscale Pacific Palisades, reaching out to a rising homeless population

Leaping around his rocky beach encampment across from the Getty Villa in Pacific Palisades, Sam has it better than many homeless people: sapphire skies, a beach cruiser bicycle and bags of castoffs from his affluent neighbors to give away to friends.

“I’m not homeless, I live outside and I’ve got a [big] yard,” said Sam, who wouldn’t give a last name.

“Uggs! $150!” he called out to visitors, holding up a child-size pair of the sheepskin-lined boots.

The rising homelessness that brought Sam to this serene seaside community has also brought random reports of previously unheard-of crimes — including a machete attack — and encampments to the vanilla sands of Will Rogers State Beach.

 

While business districts in downtown Los Angeles often meet such problems by paying for private cleanup and security, Pacific Palisades residents are taking a different approach. Earlier this year, they launched a private $500,000 fundraising campaign to bring mental health and other services, along with interim and permanent housing, to the community’s estimated 180 homeless residents.

Resident funding of direct homeless services is rare, experts said. But Palisades residents say it makes sense as an alternative to the current system, which often bounces homeless people from jail to hospitals to the streets.

In a community where it’s not unusual to see a driver lean out of his Range Rover to flip a homeless person a $20 bill, paying for professional help made sense.

Maryam Zar, who chairs the Pacific Palisades Task Force on Homelessness, said that after months of study, the group decided that “if we didn’t bring in a full-service provider, the law and the LAPD could do nothing to change the equation.”

“I personally think we can’t wait to get government support,” Zar said. “Our residents should be able to step up to the task and fund our own solution.”

The citizens group has contracted with the Ocean Park Community Center, a Santa Monica service agency, for outreach workers to steer homeless people into mental health, acute care and substance abuse treatment — and eventually housing. With $100,000 already in the bank from residents and local groups, including the American Legion and the Corpus Christi Catholic Church, the plan is to have two full-time workers in the field in January.

“It’s commendable,” said Sam Tsemberis, a New York-based homeless services and housing pioneer who is consulting with Los Angeles veterans officials. “Even more amazing, it is citizens actually raising the funds to move people from Pacific Palisades to someplace with services for homeless people.”

But the homeless of Pacific Palisades are unlikely to receive housing there, given the neighborhood’s soaring real estate values. That could fuel charges of NIMBYism, which surfaced in 2010 when the community council fought against a proposed sober living home.

“It would be great if the community thought about the creation of affordable housing in their community,” said Nan Roman, executive director of the National Alliance to End Homelessness in Washington, D.C.

Privatizing homeless services also raises an equity question: Many Southern California neighborhoods with larger homeless populations can’t raise money as easily.

“In my district, churches and community groups have their own homeless operations, food kitchens and such, but they don’t have fundraising ability to the tune of a half-million dollars,” said Los Angeles Councilman Marqueece Harris-Dawson, co-chair of the city’s homelessness and poverty committee. “That’s the class privilege. If you have the money, you can do just about everything you want.”

Not every Palisades resident is sold on the services approach. Many continue to push for police action, or argue that their taxes should cover homeless services.

It can take years to win homeless people’s trust and talk them indoors. And their attachment to the beach could make it harder.

Despite the lack of shelters or other traditional services, homeless people survive in Pacific Palisades by recycling cans and bottles or relying on the kindness of strangers.

“The people of Pacific Palisades are very generous,” said Annie Caraway, a seven-year homeless resident who serves as a den mother of sorts for other transients. “They give us stuff all the time.”

 

Hundreds of homeless riverbed dwellers at risk of drowning from El Niño flooding, experts say

Ocean Park executive director John Maceri said his organization houses 400 homeless people a year in mid-Wilshire, the San Fernando Valley and other neighborhoods, but generally not in the beach cities.

“I’ve had the conversation all the time, ‘I want an oceanfront apartment,'” he said. “I say I’ll be happy to help you when you can afford beach property.”

Some task force members already play an active role in ensuring the well-being of their homeless neighbors, whose stories reflect the wide range of problems that force them into the streets.

Patrick Hart, 67, said he patrols the beach to check on homeless people as part of his 12-step recovery from alcoholism.

One day last week he awakened in the shrubbery Jesse Littlefield, a 57-year-old former Marine and ironworker from North Carolina, and Jill Kline, 56. After summer police sweeps at the beach, homeless people started hiding in bushes, where they are plagued by bugs and ground squirrels, Hart said.

When a siren sounded in the distance, Kline called out “McCormick,” just before one of the company’s ambulances screamed into view. She’s lived outside so long she can distinguish ambulances by their wails.

“Being homeless it’s hard to be normal, but you do the best you can,” she said.

Michael Day, 46, is enrolled in a local film school but said he couldn’t afford expensive equipment and a place to live on his financial aid checks. Earlier that day, police had asked him to take down his beach tent.

“The cops said, ‘Hey, guy, wrap it up, dude. People with all their windows up there have a clear view of your tent,'” Day recalled. He said he was debating moving on or hiding his gear in a bush.

“The good people of the Palisades have been kind enough to share their beach with me,” he said. “It’s cool.”

Hart came upon Caraway sitting at the bus stop where she has spent most of her days these last seven years. Caraway said she is moving into a place in Burbank next month.

She could recall only a couple of other homeless people who found housing — but at least half a dozen others died in the streets, she said.

“They drank themselves to death,” she said.

The full-time outreach workers will have the time to get to know each homeless person in the Palisades and wait for them to be ready to move indoors.

Eventually they accept housing after “somebody is physically assaulted or suffers physical deterioration,” Maceri said. “It takes a long time, but this is the essence of the work.”

“We can only take care of one person at a time,” Hart said.

Posted on November 1st 2015 on LAtimes.com. article by Gale Holland