I’m concerned with the shortage of young attorneys entering the legal profession. It’s a real problem, particularly in rural areas. Buzz around the internet and you’ll see how serious the issue has become. According to the American Bar Foundation Lawyer Statistical Report, in 1980 36% of the nation’s licensed lawyers were under the age of 35. By 2005, only 13% were under 35 years of age. Roughly 25% of 2000 law school graduates were no longer working in the legal profession by 2012. The percentage of attorneys age 35-64 continues to increase while the profession is graying. Sound familiar?
The recent barrage of articles on “appraiser shortages” has been infuriating to those actually working within the profession. It’s understandable given that appraisers are held to a standard of supportable and documented conclusions in their valuation work yet have that very profession undermined by a litany of stereotypes, misinformation, and anecdotal incidences.
The exodus of young people from some areas of rural America is real but is a cross-profession issue. It applies to doctors, attorneys, appraisers, and most other professions in rural markets. There are a number of appraisers in rural areas who would be glad to do appraisals at market rate fees. Let’s even set that aside and just agree that a single lender’s story about having trouble finding an appraiser in a town of 800 people should not serve as the guiding principle for future regulation. Nor do I see the legal community suggesting that we come up with other ways to meet our future legal service needs. It’s generally understood that while there are ebbs and flows, in a free and open market, supply will find demand.
Speaking of supply and demand, our firm recently compiled some data on the supply of appraiser credentials in comparison to mortgage origination volume. Based on the level of hysteria out there, I bet this will show how few appraisers we have to complete all of this mortgage finance work, right?
Wrong. The number of active credentials on the National Registry was 92,434 in 2003. It was 96,856 as of 2016. That’s an increase of 5%. Meanwhile, the number of annual loan originations actually dropped 42% over that same period, according to ATTOM Data Solutions. Most of the articles claiming an appraiser shortage reference the number of credentials on the registry in 2007 (121,407) versus 2016 and then build the narrative around a 20% decline in appraisers. This is completely misleading and measures the supply of appraisers from only the high water mark.
How about looking at just Cert. Res. licenses compared to originations?
Same story here. For every Cert. Res. credential on the national registry, there were 173 annual mortgage originations in 2016. That’s 14 originations per month, per residential appraiser. That’s hardly an overwhelming monthly work load. And those figures don’t account for Cert. Gen. appraisers who also do residential work.
It’s also been suggested that appraiser supply could be measured by unique credentials submitted through Fannie Mae’s UDCP portal as this is the true supply of appraisers doing mortgage finance work. That’s a reasonable suggestion. According to Fannie Mae, they have roughly 50,000 annual unique credential submissions. As of 2016, the ASC Registry reported 49,654 Cert. Res. credentials, so this method indicates the same 14 originations per month as the Cert. Res. registry method we list above. Of course, that also doesn’t account for the appraisers who want to be part of the supply but can’t manage to make the economics of mortgage finance appraisals work.
There are plenty of appraisers and we have every incentive to grow and to eventually replace our labor with future appraisers. Just like any other business.
The prospect of manufacturing a complex solution to a problem is awfully seductive. Who wouldn’t want to be the guy or gal that saves the proverbial day? But some problems are simple. Some problems don’t require new grant programs, specialized training incentives, or manipulation of supposedly objective educational and experience requirements. Some problems are simply an issue of supply and demand. I, like most other appraisal business owners, would love nothing more than to continue expanding my business. If that’s not happening, it’s because the economics of the business won’t allow it. It’s as simple as that. Don’t overthink it.There. Is. No. Shortage. If someone has better data to dispute that, then fine. Let’s see it. But we’ve done the research. And if you want to continue arguing that there is a shortage, you’re going to have to show your work file!
There. Is. No. Shortage. If someone has better data to dispute that, then fine. Let’s see it. But we’ve done the research. And if you want to continue arguing that there is a shortage, you’re going to have to show your work file!