There Is No Appraiser Shortage. Plus, The Lawn Police And Housing Price Records.

This week I caught up on my 99% Invisible podcasts, some of the most amazing stories on topics that often touch the housing market. My recent favorite was titled “Lawn Order” (say it fast enough and it becomes “Law & Order”) covering the topic of homeowners who don’t keep up with their lawn and the origination of the lawn as a symbol of the American Dream, part of the homeownership package.

Homeowners can spend a few days in jail for letting their lawn get out of hand. Remember the housing crash? Funny, I don’t remember execs going to jail for creating zombie houses, seriously damaging property values of nearby neighbors.

When I lived in Chicago, my former boss lived in a booming suburb to the west called Naperville and she would turn her sprinklers on at night to reduce the odds of being busted by the “sprinkler police” who were very aggressive.

shades of green600

When I was a young kid growing up in Rehoboth Beach, Delaware, I remember a local golf course was converted into a subdivision with tiny lots. Many residents filled their small patch of land with white stones or concrete , some even painted them green, to eliminate the maintenance hassle. Although the painting part seems like a hassle as the paint fades.

An imagined conversation between a couple who need to spruce (type of green) up their painted concrete might go something like this: “Honey, the yard needs painting, do you want to go with the Apple Green this time, since the Forest Green didn’t hold up.” “I don’t know, I’m thinking we should brighten it up and go all in with a Lime or an Emerald.”


Now in California, the drought has converted “lawn shaming” to #droughtshaming as restrictions are imposed.

Of course there are services that will paint your brown grass green.

Since I’m not planning to move out west, the experience of raising four sons placed my lawn mowing days far behind me, thank goodness.

Getting sick of false housing market guru labels

When I took this picture in Times Square New York a while back, I somehow knew it would be useful to have.


This week I let loose on a blog rant about getting bad advice from “gurus” and puffed up titles. To go into aggressive attack mode is out of character for me, but sometimes it needs to be done for my own sanity. If you can handle it, check out Multi-millionaire Motivational Speaker Dean Graziosi Shares His Appraisal Wisdom and the equally long update at the end.

And within the real estate profession itself, the “Chief Economist” title is widely misunderstood. The consumer sees it as prestigious and it certainly is for the most part, but when the position sits at a trade group, their job is to convey information only to their group’s benefit. Think NAR, NAHB, etc. Now a new bloated title trend brewing and it’s called data scientist. I used to think my aspirational alias title of “master of the universe” title was a little too much. No more.

There is no appraiser shortage!

ALTERNATIVE TITLE: There is a shortage of appraisers willing to work for half the market rate and submit to draconian demands of 24 hour turn around by 19 year olds chewing gum from outside your market area!

There is an insane discussion within banking circles today that there is now a shortage of appraisers to provide valuation expertise during the issuance of mortgages. Frankly it’s an argument that is entirely self-serving to the banking industry and appraisal management company industry they rely on. The American Bankers Association held a meeting to address the appraiser shortage (subscription required: Valuation Review, a newsletter for the appraisal industry that is well worth it).

The American Bankers Association (ABA) premise that there is an appraisal shortage is completely misleading. They are only trying to keep the appraisal management company process relevant. Cost and speed are the only real appraisal priority to mortgage lending right now despite all the pain the mortgage industry has suffered as a result of not caring what the actual value of a property was during the last boom & bust housing cycle.

Here’s why.

  • Dodd-Frank/HVCC Since the financial crisis began, legislation that now sits within Dodd-Frank (thanks to former NYS Attorney General Cuomo’s attempt to reign in mortgage brokers) enabled the appraisal management company industry to dominate the ordering and reviewing of appraisals completed for banks.
  • Appraisers got a 50% pay cut overnight in 2009 Bank appraisers got a 50% pay cut, essentially giving half of the mortgage applicant’s appraisal fee payment to a third part institutional middleman (AMCs), causing “good appraisers” to leave the business or move to other appraisal specializations in droves. Imagine any profession in the U.S. – give them a 50% pay cut overnight and what happens? Experts leave and new less educated and less experienced enter. It’s simple economics.
  • AMC claim their analytics capacity offset the quality loss Analyzing crappy reports using crappy data from those crappy reports is the same logic as rating agencies giving CDO tranches a “AAA” rating when only a small part of those mortgage portfolios were actually “AAA”.
  • Banking’s view of the appraisal as a commodity It’s a professional service.

The amazing part of the ABA optics they are expressing to the world is that it is patently false. There are plenty of appraisers out there. But there is a shortage of those willing to work for 50% of the prevailing wage. It’s that simple. Economics has taken over and the banking/AMC industries has run out of form-filling robots to perform appraisals for 50% of the market rate.

Here’s a chart passed around the industry from a recent Appraisal Foundation meeting.


Market Reports Gone Wild


This week took me halfway through our third quarter market report gauntlet – 2 more weeks to go. Douglas Elliman Real Estate published our research on the following markets. The general theme was record or near record sales prices and rents, combined with heavy sales volume. That seems to be the key differing factor from the prior housing boom. It’s happening without the normalization of credit although I am not sure how long it can be sustained. Inventory is still low and economically speaking, wages in these regions remain flat despite robust economic activity.

Elliman Report: Manhattan, Brooklyn & Queens Rentals 9-2015
-MANHATTAN For the nineteenth consecutive month, median rent increased from the same period a year ago to the second highest level ever recorded and the highest point in more than five years. A robust city economy, record employment gains and tight credit conditions helped spur additional rental price growth. Median rental price increased 5.4% to $3,437 from the same period last year..
-BROOKLYN Brooklyn rental price indicators continued to move higher on a year-over-year basis. Median rental price increased from the same period last year but fell short of the records set in the prior three months. Median rental price increased 7.7% to $2,953 from the same period a year ago. Following the same pattern, average rental price rose 7.4% to $3,275 and rental price per square foot increased 17% to $43.61 respectively over the same period…
-QUEENS A surge in the overall price trend indicators returned to the northwest region of Queens. Price volatility caused by the varying mix of new development introduced to the market continued. Median rental price jumped 18.4% to $2,954 from the same period a year ago. Average rental price and rental price per square foot followed the same pattern…

Elliman Report: Brooklyn Sales 3Q 2015
Brooklyn housing prices broke records this quarter as demand expanded and supply fell. Robust economic conditions and the rebranding of Brooklyn as a Manhattan competitor continued to play a role in the stronger market. Median sales price set a new record, rising 15.1% to $676,250 from the same period a year ago. Brooklyn remains the only New York City borough with a median sales price above the pre-financial crisis high. The third quarter median sales price was 25.2% above the same period eight years ago. Still, 73.8% of all Brooklyn property sales in the third quarter were below the $1 million threshold…

Elliman Report: Queens Sales 3Q 2015
Queens housing prices set records as declining inventory met with a surge in sales activity and a robust city economy. Median sales price jumped 14.1% from the prior year quarter to a new high of $450,865. This was the fifth year-over-year quarterly increase for this price trend indicator. Average sales price followed the same pattern, rising 12.8% to a new record of $522,378 and the first time this metric had exceeded the $500,000 threshold. The luxury market, measured as the top 10% of all sales during the quarter, had a record high entry threshold of $925,000 and price gains consistent with the overall market…

Elliman Report: Westchester Sales 3Q 2015 [Expanded!]
The Westchester residential housing market, including single family, condo, co-op and multifamily sales, reflected price stability despite the highest sales total in at least 34 years and falling supply. Median sales price for all residential properties edged 0.8% higher to $529,000 from the prior year quarter, while the remaining price indicators showed mixed results. Average sales price slipped 2.9% to $696,654 and average price per square foot increased 4.9% to $319 respectively from the prior year quarter. Countywide the number of sales expanded 5.5% to a record of 3,044 as the amount of inventory slipped 2.7% to 5,653 respectively from the same period last year…

Elliman Report: Putnam & Dutchess Sales 3Q 2015 [New Report!]
-PUTNAM Housing price trend indicators moved higher in the third quarter as market conditions tightened. Median sales price for single family and condo sales increased 5.4% to $316,000. Average sales price followed the same pattern, up 8.7% to $365,044 and average price per square foot increased 7.6% to $184 over the same period. Condo prices rose faster than single family prices. Condo median sales price jumped 15.1% to 262,500 and single family median sales price increased 4.2% to $333,500 respectively from the prior year quarter…
-DUTCHESS We are please to announce our market report coverage area has expanded to Dutchess county, New York. Dutchess county housing prices showed mixed results in the third quarter. Median sales price increased a nominal 0.6% to $270,000, reflecting the general stability of the market. Average sales price and average price per square foot slipped from prior year levels. Average sales price fell 4.8% to $286,674 and average price per square foot declined 3.7% to $130 respectively from the prior year quarter…

There is a lot of shaming going on at this very moment as I wrap up this note. Not what I talked about above, but rather my wife telling me I am late for our lunch date. Ok, ok.

See you next week.

Jonathan Miller, CRP, CRE
Miller Samuel Inc.
Real Estate Appraisers & Consultants

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