Here are 7 trends to watch in the 2022 appraisal market
The tides of the mortgage industry are changing as we head into 2022, and just like the sand under the waves, we can expect the appraisal landscape to shift along with it.
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The tides of the mortgage industry are changing as we head into 2022, and just like the sand under the waves, we can expect the appraisal landscape to shift along with it. Appraisers, like many other service providers, must adapt to market changes to accommodate their clients’ needs. Whether it is providing appraisal services, underwriting services or title services, a mortgage application cannot proceed without their input.
We have reviewed and analyzed recent stakeholder and government data, and we are pleased to deliver the following analysis and predictions for 2022.
Current volume and trends
It is fairly well-known that the appraisal industry has a supply and demand issue. Freddie Mac recently released trend analysis of appraisal activity for appraisals submitted to the Uniform Collateral Data Portal. This data clearly illustrates the issue:
- Appraisal volume exceeded the high-water mark of 700,000 monthly submissions to the appraisal data warehouse on multiple occasions in 2021. Prior to 2020 it was a rare occurrence for volume to exceed 600,000 per month.
- The number of appraisers completing appraisals for transactions eligible for sale to the GSEs has remained relatively flat.
In addition to the supply and demand issue in 2021, we also saw continued challenges around appraiser throughput, appraisal turn times and appraisal fees. 2021 also introduced change at the policy level, as appraisal waivers began to slow down and the FHFA’s announcement to allow desktop appraisals.
We’ll dig deeper into each of those topics below, but first we’ll explore one of the biggest driving forces on appraisal: market volume.
2022 Outlook for volume
Mortgage rate predictions for 2022 by industry stakeholders show rates for 30-year fixed mortgages to range from 3% to 4%. As of this writing, in 2021, 31 of 45 weeks had mortgage rates below 3%. The last time the 30-year mortgage rate was at or above 3.5% was in March of 2020. Prior to that, we have to go back to October 2016 to see rates at 3.5% or below.
Meanwhile, the Mortgage Bankers Association (MBA) is forecasting purchase mortgage originations to increase 9% in 2022 and refinance originations to decrease by 62%. Appraisal demand from generators (i.e., HELOC and private clients) is expected to remain stable to slightly declining.
How does this impact appraisal volume? Mathematically, the MBA predictions result in a loss in demand between 30% to 35% for appraisals associated with mortgage originations. As application volume is anticipated to shift from predominantly refinance activity to purchase activity, we anticipate the demand for appraisals in the mortgage sector to decline 15% to 20% with other demand generators pointing toward stability or slightly declining.
In a recent Fitch Ratings analysis on nonbank mortgage origination outlook, analysts stated that “rising rates fueled by the tapering of Fed asset purchases and home price appreciation from the growing disparity between housing supply and burgeoning demand are also expected to contribute to lower volumes and margins into 2022.”
Appraiser supply
It is worth addressing the overall appraiser supply here as well. Analysis of appraiser credentials in the U.S. shows continued decline. According to 2021 data from the Appraisal Institute, the current number of state-issued appraiser credentials is 93,309, which is more than 3,000 fewer credentials cited in a 2019 Appraisal Institute study, which put the number of credentials at 96,856 in 2016. Attrition and supply continue to be a market concern.
Efforts to date to bolster the ranks of credentialed appraisers has resulted in reducing the rate of decline, but decline continues nonetheless. Perhaps diversity, equity and inclusion efforts by industry stakeholders and the Appraisal Foundation’s PAREA efforts may bear fruit in the future; however, significant impacts to increase the ranks of qualified appraisers are not anticipated in 2022.
Appraiser productivity
According to our analysis of data released by both Freddie Mac and Fannie Mae, the count of active appraisers based on mortgage activity has been mostly flat since 2018, with minor fluctuations. The rise in sales and refinancing activity in 2021 resulted in increased appraiser productivity, ranging between 50% to 100% per appraiser.
How does this convert on a per appraiser basis? With 40,000 appraisers having their appraisal work submitted to the GSE appraisal portal, the median throughput level pre-2020 was approximately 10 appraisals per month, or 2.5 per week. From 2020 through 2021, that throughput level increased to 15 to 20 appraisals per month, or 3.75 to 5 appraisals per week.
And while appraisers have shown they have adjusted processes to produce at a higher level of output on a weekly basis, no significant process changes are anticipated to contribute to be a drag on productivity.
Turn times
Unfortunately, a centralized source measuring market-level appraisal turn times does not exist. Data is often limited to anecdotal experience by individual lenders, users of appraisal services and reporting by a handful of appraisal management companies. In general terms, prior to 2021, it was common for appraisals to have an average turn time between 9 and 12 days. Based on analysis of three national AMC quoted turn times on their websites, in 2021, the turn time range expanded to 8 to 21 days. Those states having the fewest number of appraisers often show the longest cycles. These numbers are in line with what we see lenders experiencing using the Reggora platform.
While pipeline volume plays a large part in the equation, the geography and the supply of appraisers in particular markets are contributing factors and the range of turn times can vary significantly across localities within the marketplace.
The National Association of Realtors projects 2022 home sales activity to be slightly lower than 2021. As a result, we should expect to see overall appraisal turn times improve. To keep this in perspective, a 20% decline in demand when production is 3.75 appraisals per week results in a decline of one appraisal per week per appraiser. For locations where the supply of appraisers is abundant and the appraisal process itself can be completed in a standardized amount of time, we anticipate a return to pre-2021 levels with turn times of 8 to 10 days.
In locations where there are limitations on the supply of appraisers, or the amount of time it takes to complete an appraisal is extended due to lengthy drive times and data-challenged locations, only modest gains are anticipated and extended turn times will continue to be the norm.
Of course, fluctuations will occur due to seasonality, as the appraiser supply is anticipated to remain fixed and demand is variable. If there is heightened risk of either supply side or demand side variations, then the above predictions would need to be revised.
Appraisal fees
Due to the supply and demand crunch, appraisal fee escalations and upward pressure on fees has received much attention in 2021. As we expect market volume to drop by at least 20% to 30% moving into 2022, it is anticipated that some relief of fee pressure will occur; however, complex submarkets, complex properties and appraisals in locations deemed difficult, where the appraiser is required to expend more time on an assignment, will continue to see fee pressure. The introduction of desktop and potentially of alternative products, should also assist in helping fees to come down from their 2021 levels, but they will most likely stay elevated compared to historic norms.
GSE Appraisal Policy
Both Fannie Mae and Freddie Mac have underwriting programs that allow lenders to waive the requirements for an appraisal in certain circumstances. No or low cash-out refinance applications receive the largest share of waivers. From June 2020 through May 2021 the percentage of appraisal waivers increased, and activity averaged approximately 385,000 per month. However, when looking at waiver activity measured from January 2021 through June 2021, the data show a decline of approximately 11.5%. We expect that number to continue to decline as refinance activity slows down.
In addition to appraisal waivers, desktop appraisals have also been a topic of conversation among the GSEs. In October, the FHFA announced that desktop appraisals, similar to what was allowable during the COVID-19 appraisal flexibilities, will be allowed as we move into 2022. We also expect desktop appraisals to replace some of the loans that were previously qualifying for appraisal waivers. Finally, we also see a possibility for the introduction of an even broader set of alternative appraisal products that incorporate new technology and processes to further address issues with turn times, racial bias and supply constraints.
Racial bias
The topic of racial bias in real estate, and in appraisal, has been a hot one. 2021 brought forward the Property Appraisal and Valuation Equity (PAVE) Interagency Task Force to address inequity in home appraisals. PAVE is required to bring forward a final action report in 2022. And while it is unknown what the final recommendations will be, PAVE’s focus is multi-pronged, and recommendations are anticipated revolving around government oversight, industry practice, consumer and practitioner education and making available high-quality data to combat racial inequality.
Conclusion
There’s a lot of change happening across the industry, and the foundation for appraisal is more like sand than stone. As we head into 2022, we can expect some balancing and displacement to occur. While demand for appraisal services is anticipated to drop due to less refinance activity, we will also see increased demand stemming from fewer appraisal waivers and more desktop appraisal products. And while turn times and fee pressures are anticipated to retreat back to pre-2020 levels, there remain supply pressures, particularly in geographically challenged markets. There will also be a focus on responding to the anticipated PAVE task force recommendations, whether they be on a regulatory front or through establishing new industry practice.
One thing is for certain: As change happens in 2022, appraisers will need to rely on their skillset to measure, analyze and navigate that change.
The post Here are 7 trends to watch in the 2022 appraisal market appeared first on HousingWire.
fed covid-19 home sales mortgage rates real estate mortgagesUncategorized
Homes listed for sale in early June sell for $7,700 more
New Zillow research suggests the spring home shopping season may see a second wave this summer if mortgage rates fall
The post Homes listed for sale in…
- A Zillow analysis of 2023 home sales finds homes listed in the first two weeks of June sold for 2.3% more.
- The best time to list a home for sale is a month later than it was in 2019, likely driven by mortgage rates.
- The best time to list can be as early as the second half of February in San Francisco, and as late as the first half of July in New York and Philadelphia.
Spring home sellers looking to maximize their sale price may want to wait it out and list their home for sale in the first half of June. A new Zillow® analysis of 2023 sales found that homes listed in the first two weeks of June sold for 2.3% more, a $7,700 boost on a typical U.S. home.
The best time to list consistently had been early May in the years leading up to the pandemic. The shift to June suggests mortgage rates are strongly influencing demand on top of the usual seasonality that brings buyers to the market in the spring. This home-shopping season is poised to follow a similar pattern as that in 2023, with the potential for a second wave if the Federal Reserve lowers interest rates midyear or later.
The 2.3% sale price premium registered last June followed the first spring in more than 15 years with mortgage rates over 6% on a 30-year fixed-rate loan. The high rates put home buyers on the back foot, and as rates continued upward through May, they were still reassessing and less likely to bid boldly. In June, however, rates pulled back a little from 6.79% to 6.67%, which likely presented an opportunity for determined buyers heading into summer. More buyers understood their market position and could afford to transact, boosting competition and sale prices.
The old logic was that sellers could earn a premium by listing in late spring, when search activity hit its peak. Now, with persistently low inventory, mortgage rate fluctuations make their own seasonality. First-time home buyers who are on the edge of qualifying for a home loan may dip in and out of the market, depending on what’s happening with rates. It is almost certain the Federal Reserve will push back any interest-rate cuts to mid-2024 at the earliest. If mortgage rates follow, that could bring another surge of buyers later this year.
Mortgage rates have been impacting affordability and sale prices since they began rising rapidly two years ago. In 2022, sellers nationwide saw the highest sale premium when they listed their home in late March, right before rates barreled past 5% and continued climbing.
Zillow’s research finds the best time to list can vary widely by metropolitan area. In 2023, it was as early as the second half of February in San Francisco, and as late as the first half of July in New York. Thirty of the top 35 largest metro areas saw for-sale listings command the highest sale prices between May and early July last year.
Zillow also found a wide range in the sale price premiums associated with homes listed during those peak periods. At the hottest time of the year in San Jose, homes sold for 5.5% more, a $88,000 boost on a typical home. Meanwhile, homes in San Antonio sold for 1.9% more during that same time period.
Metropolitan Area | Best Time to List | Price Premium | Dollar Boost |
United States | First half of June | 2.3% | $7,700 |
New York, NY | First half of July | 2.4% | $15,500 |
Los Angeles, CA | First half of May | 4.1% | $39,300 |
Chicago, IL | First half of June | 2.8% | $8,800 |
Dallas, TX | First half of June | 2.5% | $9,200 |
Houston, TX | Second half of April | 2.0% | $6,200 |
Washington, DC | Second half of June | 2.2% | $12,700 |
Philadelphia, PA | First half of July | 2.4% | $8,200 |
Miami, FL | First half of June | 2.3% | $12,900 |
Atlanta, GA | Second half of June | 2.3% | $8,700 |
Boston, MA | Second half of May | 3.5% | $23,600 |
Phoenix, AZ | First half of June | 3.2% | $14,700 |
San Francisco, CA | Second half of February | 4.2% | $50,300 |
Riverside, CA | First half of May | 2.7% | $15,600 |
Detroit, MI | First half of July | 3.3% | $7,900 |
Seattle, WA | First half of June | 4.3% | $31,500 |
Minneapolis, MN | Second half of May | 3.7% | $13,400 |
San Diego, CA | Second half of April | 3.1% | $29,600 |
Tampa, FL | Second half of June | 2.1% | $8,000 |
Denver, CO | Second half of May | 2.9% | $16,900 |
Baltimore, MD | First half of July | 2.2% | $8,200 |
St. Louis, MO | First half of June | 2.9% | $7,000 |
Orlando, FL | First half of June | 2.2% | $8,700 |
Charlotte, NC | Second half of May | 3.0% | $11,000 |
San Antonio, TX | First half of June | 1.9% | $5,400 |
Portland, OR | Second half of April | 2.6% | $14,300 |
Sacramento, CA | First half of June | 3.2% | $17,900 |
Pittsburgh, PA | Second half of June | 2.3% | $4,700 |
Cincinnati, OH | Second half of April | 2.7% | $7,500 |
Austin, TX | Second half of May | 2.8% | $12,600 |
Las Vegas, NV | First half of June | 3.4% | $14,600 |
Kansas City, MO | Second half of May | 2.5% | $7,300 |
Columbus, OH | Second half of June | 3.3% | $10,400 |
Indianapolis, IN | First half of July | 3.0% | $8,100 |
Cleveland, OH | First half of July | 3.4% | $7,400 |
San Jose, CA | First half of June | 5.5% | $88,400 |
The post Homes listed for sale in early June sell for $7,700 more appeared first on Zillow Research.
federal reserve pandemic home sales mortgage rates interest ratesGovernment
Survey Shows Declining Concerns Among Americans About COVID-19
Survey Shows Declining Concerns Among Americans About COVID-19
A new survey reveals that only 20% of Americans view covid-19 as "a major threat"…
A new survey reveals that only 20% of Americans view covid-19 as "a major threat" to the health of the US population - a sharp decline from a high of 67% in July 2020.
What's more, the Pew Research Center survey conducted from Feb. 7 to Feb. 11 showed that just 10% of Americans are concerned that they will catch the disease and require hospitalization.
"This data represents a low ebb of public concern about the virus that reached its height in the summer and fall of 2020, when as many as two-thirds of Americans viewed COVID-19 as a major threat to public health," reads the report, which was published March 7.
According to the survey, half of the participants understand the significance of researchers and healthcare providers in understanding and treating long COVID - however 27% of participants consider this issue less important, while 22% of Americans are unaware of long COVID.
What's more, while Democrats were far more worried than Republicans in the past, that gap has narrowed significantly.
"In the pandemic’s first year, Democrats were routinely about 40 points more likely than Republicans to view the coronavirus as a major threat to the health of the U.S. population. This gap has waned as overall levels of concern have fallen," reads the report.
More via the Epoch Times;
The survey found that three in ten Democrats under 50 have received an updated COVID-19 vaccine, compared with 66 percent of Democrats ages 65 and older.
Moreover, 66 percent of Democrats ages 65 and older have received the updated COVID-19 vaccine, while only 24 percent of Republicans ages 65 and older have done so.
“This 42-point partisan gap is much wider now than at other points since the start of the outbreak. For instance, in August 2021, 93 percent of older Democrats and 78 percent of older Republicans said they had received all the shots needed to be fully vaccinated (a 15-point gap),” it noted.
COVID-19 No Longer an Emergency
The U.S. Centers for Disease Control and Prevention (CDC) recently issued its updated recommendations for the virus, which no longer require people to stay home for five days after testing positive for COVID-19.
The updated guidance recommends that people who contracted a respiratory virus stay home, and they can resume normal activities when their symptoms improve overall and their fever subsides for 24 hours without medication.
“We still must use the commonsense solutions we know work to protect ourselves and others from serious illness from respiratory viruses, this includes vaccination, treatment, and staying home when we get sick,” CDC director Dr. Mandy Cohen said in a statement.
The CDC said that while the virus remains a threat, it is now less likely to cause severe illness because of widespread immunity and improved tools to prevent and treat the disease.
“Importantly, states and countries that have already adjusted recommended isolation times have not seen increased hospitalizations or deaths related to COVID-19,” it stated.
The federal government suspended its free at-home COVID-19 test program on March 8, according to a website set up by the government, following a decrease in COVID-19-related hospitalizations.
According to the CDC, hospitalization rates for COVID-19 and influenza diseases remain “elevated” but are decreasing in some parts of the United States.
Government
Rand Paul Teases Senate GOP Leader Run – Musk Says “I Would Support”
Rand Paul Teases Senate GOP Leader Run – Musk Says "I Would Support"
Republican Kentucky Senator Rand Paul on Friday hinted that he may jump…
Republican Kentucky Senator Rand Paul on Friday hinted that he may jump into the race to become the next Senate GOP leader, and Elon Musk was quick to support the idea. Republicans must find a successor for periodically malfunctioning Mitch McConnell, who recently announced he'll step down in November, though intending to keep his Senate seat until his term ends in January 2027, when he'd be within weeks of turning 86.
So far, the announced field consists of two quintessential establishment types: John Cornyn of Texas and John Thune of South Dakota. While John Barrasso's name had been thrown around as one of "The Three Johns" considered top contenders, the Wyoming senator on Tuesday said he'll instead seek the number two slot as party whip.
Paul used X to tease his potential bid for the position which -- if the GOP takes back the upper chamber in November -- could graduate from Minority Leader to Majority Leader. He started by telling his 5.1 million followers he'd had lots of people asking him about his interest in running...
Thousands of people have been asking if I'd run for Senate leadership...
— Rand Paul (@RandPaul) March 8, 2024
...then followed up with a poll in which he predictably annihilated Cornyn and Thune, taking a 96% share as of Friday night, with the other two below 2% each.
????????️VOTE NOW ????️ ???? Who would you like to be the next Senate leader?
— Rand Paul (@RandPaul) March 8, 2024
Elon Musk was quick to back the idea of Paul as GOP leader, while daring Cornyn and Thune to follow Paul's lead by throwing their names out for consideration by the Twitter-verse X-verse.
I would support Rand Paul and suspect that other candidates will not actually run polls out of concern for the results, but let’s see if they will!
— Elon Musk (@elonmusk) March 8, 2024
Paul has been a stalwart opponent of security-state mass surveillance, foreign interventionism -- to include shoveling billions of dollars into the proxy war in Ukraine -- and out-of-control spending in general. He demonstrated the latter passion on the Senate floor this week as he ridiculed the latest kick-the-can spending package:
This bill is an insult to the American people. The earmarks are all the wasteful spending that you could ever hope to see, and it should be defeated. Read more: https://t.co/Jt8K5iucA4 pic.twitter.com/I5okd4QgDg
— Senator Rand Paul (@SenRandPaul) March 8, 2024
In February, Paul used Senate rules to force his colleagues into a grueling Super Bowl weekend of votes, as he worked to derail a $95 billion foreign aid bill. "I think we should stay here as long as it takes,” said Paul. “If it takes a week or a month, I’ll force them to stay here to discuss why they think the border of Ukraine is more important than the US border.”
Don't expect a Majority Leader Paul to ditch the filibuster -- he's been a hardy user of the legislative delay tactic. In 2013, he spoke for 13 hours to fight the nomination of John Brennan as CIA director. In 2015, he orated for 10-and-a-half-hours to oppose extension of the Patriot Act.
Among the general public, Paul is probably best known as Capitol Hill's chief tormentor of Dr. Anthony Fauci, who was director of the National Institute of Allergy and Infectious Disease during the Covid-19 pandemic. Paul says the evidence indicates the virus emerged from China's Wuhan Institute of Virology. He's accused Fauci and other members of the US government public health apparatus of evading questions about their funding of the Chinese lab's "gain of function" research, which takes natural viruses and morphs them into something more dangerous. Paul has pointedly said that Fauci committed perjury in congressional hearings and that he belongs in jail "without question."
Musk is neither the only nor the first noteworthy figure to back Paul for party leader. Just hours after McConnell announced his upcoming step-down from leadership, independent 2024 presidential candidate Robert F. Kennedy, Jr voiced his support:
Mitch McConnell, who has served in the Senate for almost 40 years, announced he'll step down this November.
— Robert F. Kennedy Jr (@RobertKennedyJr) February 28, 2024
Part of public service is about knowing when to usher in a new generation. It’s time to promote leaders in Washington, DC who won’t kowtow to the military contractors or…
In a testament to the extent to which the establishment recoils at the libertarian-minded Paul, mainstream media outlets -- which have been quick to report on other developments in the majority leader race -- pretended not to notice that Paul had signaled his interest in the job. More than 24 hours after Paul's test-the-waters tweet-fest began, not a single major outlet had brought it to the attention of their audience.
That may be his strongest endorsement yet.
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