Nov. 2015-Opportunity Knocks

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32 | Th e M Rep o RT Feature student debt holders (even if you have a deferred payment plan in place) to qualify for a mortgage. Many large lenders have drastical- ly moved away from FHA-backed loans due to perceived credit risk. The mortgage credit availability index continues to trend the way of loosening credit standards, but the data is skewed by jumbo loans, while entry-level market entrance is still relatively difficult to overcome. Essentially, it is only getting easier for high-end real estate owners to qualify at this time. If loosening credit standards continue to be the trend in the conventional lending arena, it could be the catalyst to engage the millennial generation to help stop the declining trend of US homeownership, which is at a 48-year low. It is critical for the market as a whole to move towards more inclusionary hous- ing policies. As lenders operate with more familiarity in today's regulated environment, the trend will continue for loosening credit standards. This is especially the case for larger institutions. Rental Market Influence T he rental market is booming, and it is a clear indicator that incomes are not keeping pace with rising home prices. According to the S&P Case- Shiller, the 20-metro home price index rose 4.7 percent, while wage growth was only 2.2 percent year-over-year. When income does not pace with home prices, it generally affects the first time homebuyer the most. One upside to the rental numbers is that vacancy rates are getting better every month, and that is good for all stakeholders and the U.S. economy as a whole. The rental market is not likely to slow down anytime soon. Distressed sales continue to make up less of the national market, now under 9 percent, which is the lowest it has been in 15 years. That trend will continue to decline with the combination of improving equity positions and more sound lending prac- tices over the past five years that will safeguard against growing foreclosures. The Appraisal Sector T he valuation profession has had to endure the turbulent market and sweeping regulatory changes as much as any group. Couple those complicated mat- ters with an aging community of appraisers, increasing difficulty in bringing in new generations of residential appraisers, the scope of work on a typical appraisal assignment increasing, and fees not keeping pace, you have many of the industry leaders starting to wave warning flags. The general population of appraisers has declined 20 percent in the past eight years and the current numbers do not truly demonstrate the number of semi-retired appraisers that are only occasionally practicing or performing much less volume than in years past, which could equal another 30 percent. This trend will only worsen sharply in the next five years. According to the Appraisal Institute, only 12 percent of appraisers are between 36-50 years of age and only 1 percent is 25 years old or less. The new 2015 requirement to have a bachelor's degree before obtaining an appraisal license is only part of the barrier. An additional two-year training period before being allowed to sit for the state exam is simply not economically feasible for the new entrant or the fragmented mentor population of mainly home-based appraisers. While there are many trade associations and regulators looking at this issue, there is no solution on the table that will resolve the problem in the next year. The shortage of appraisers has already affected the lending markets in rural areas as well as booming markets. Ask anyone in charge of placing appraisal orders how difficult it is to not only place an appraisal in South Dakota, but Denver right now. The extended time it takes to receive an appraisal, the limited options of knowledgeable experts to place the order with, and the inflated price to get the appraisal done in the end hurt everyone in the transaction and ultimately the consumer. Any hot market in 2016 can expect to experience closing delays and higher costs simply because of appraiser short- ages. There needs to be pressure from all sides to address this problem, sooner rather than later. A Promising Outlook T hrough booms and busts, national recessions and sweeping regulations, the hous- ing market has been a bumpy ride for the last 15 years. The next year should bring us to a "sweet spot" with less volatile events and more predictabil- ity for all sides. Although an election year seems to always increase the odds for a monkey wrench to be tossed, housing policies do not seem to even be in the presidential discussion—walls and emails are driving the agenda. Maybe that is a good thing for the housing market; the last two elections have put a bright spotlight on us as a whole and certainly brought to light many of the issues we have been working to resolve the last nine years. The perceived credibility of institutions and professionals involved in the housing market has improved since the low days of the housing- induced recession, and it is a great time to be in the industry. We can't all be winners in the hous- ing market, but like Stengel said, "Without losers, where would the winners be?" Brandon Boudreau is COO of Detroit-based Metro-West Appraisal Co. LLC, where his responsibilities include overseeing daily operations for the company and its more than 250 employees in 75 metropolitan markets across the nation. Boudreau is a state-certified appraiser with more than 14 years' industry experience with companies in Arizona and Michigan. He is a delegate member of The Appraisal Foundation Advisory Council, a member of the Collateral Risk Network, and a member of Five Star Institute's National Appraisal Congress. 3MReport.indd The next year should bring us to a "sweet spot" with less volatile events and more predictability for all sides.

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