Earlier this month, the Standard & Poor’s Ratings Services (S&P) stated that it will take longer than predicted for the U.S. housing market to absorb distressed and foreclosed properties. This means that prices may continue to be low over the next several years. Although foreclosures are slowing, borrowers are continuing to default on their mortgages. The excess of defaults has created a surplus of homes for sale which many are calling the “shadow inventory.” S&P is predicting that it will be another 44 months until this inventory is cleared. Nevada, Arizona, Florida, and California are some of the states hit the hardest by the U.S. housing bust.
This new prediction for the fragile U.S. housing market couldn’t come at a worse time for struggling real estate appraisers. The long expected rebound of the market and the new Dobb-Frank Act requiring the registration of Appraisal Management Companies (AMCs) means appraisers will begin to see less and less work. The Dobb-Frank Act calls for high AMC registration fees which will eventually force AMCs to contract fewer appraisers. The combination of these two factors equals bad news for appraisers. It may not be economically feasible for many appraisers to remain in the real estate business.
This decrease in demand for appraisal services will not only reflect in the number of appraisers leaving the business, but in the number of individuals joining the profession. A decrease in the number of professional appraisers could actually benefit the appraisers who are able to weather the storm. If appraisers can band together and set slightly higher fee precedence, they would be able to take control of setting the standards of fees that are customary and reasonable for their industry. Slightly higher fees for appraisers could help them sustain in this market. It appears that the rebound of the housing market is somewhere over the horizon. The year 2011 will be a telling year for appraisers.
Author
Amelia R. Hyden President & CEO Appraisal Management Company of Southern Nevada Direct Phone (702) 824-1614 Phone (888) 867-9763
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