Mortgage Application Volume Nearing Historic Low
Appraisers, I’m almost reluctant to distribute this article, but the reality is what it is. Per the Mortgage Bankers Association (MBA), the loan application volume is at another low point in our history. The article in Mortgage News Daily titled “Mortgage Application Volume at Lowest Levels Since 1996” in this link provides context.
For a related perspective, the article contains a graph, which can be expanded to show mortgage rates and application volume for decades.
The brown line in the graph shows 30 year mortgage rates – since early 1971. The light blue indicates the loan application volume, which corresponds to appraisal assignments. We currently are about the same as 2001, and if rates continue rising, we’ll probably experience what appraisers did in 1996, even though rates were on a downward track then.
The MBA apparently didn’t start tracking and graphing application volume against mortgage rates until about 1991. However, the graph can give you a visual perspective of history, especially if you have not been an appraiser for many years.
Many appraisers, yours truly included, became associated with this profession roughly two decades ago, when rates were going down and appraisal work was increasing. As the graph indicates it’s been a roller coaster ride, but generally speaking up to late in 2021 to early in 2022, it’s been financially rewarding for many appraisers.
The unfortunate aspect of this is the federal political and monetary policy instituted as a result of the 2020 COVID crisis. Trillions of dollars, that we didn’t have and had to ‘manufacture’, were dumped into the economy. We are now reaping the consequences of that with high inflation that the “Fed” is trying to control. As a result, housing mortgage interest rates have dramatically increased, appraisal workflow has degraded, the overall housing sector is suffering, and many appraisers have had to make tough decisions about ‘staying or bailing out.’
I’m in that “boat” presently. To be honest, I’m in a forced retirement that I didn’t really want. Some private assignments are keeping me going, but mortgage lending work has dried up.
Many of my peers are either quitting, or have taken part-time work. One I know of let the license expire and is now a real estate agent. Another operates a doggy day care business. A lady I know who has a passion for wine has become a ‘wine pourer’ serving tasters at a classy winery. One appraiser works part-time at a pizza restaurant. An appraiser became a ‘short term rental host’ by sub-leasing with owner consent an urban property, fixed it up, and makes it available on the short term web sites. A good friend of mine has made the decision to back away entirely from this biz. Other appraisers are getting a few morsels of greenbacks as ‘gig workers’ doing property inspection photos, and others are doing more detailed work as Property Data Collectors.
Minimal actual mortgage related appraisal work available is dominated by AMC’s. Most of those have pretty much demanded appraisers dramatically reduce their ‘fee for assignment.’ The AMC’s do this to protect THEMSELVES in order to stay in business. If appraisers are not willing to lower assignment fees, they are passed over because some other appraiser is willing to sell their soul to the AMC just to keep a few dollars flowing into their business. This happens every time appraisal assignment volume goes down. Meanwhile, the borrower is not necessarily paying less for “the appraisal” they need. Unless, as I’m finding out, the local lender uses appraiser lower than what should be customary fee ‘bids’ to quote appraisal fees to the borrower.
Some appraisers, a true minority, have been able to transition to private, non-mortgage-lending appraisal work, but that’s not as easy as some advocate. And many appraisers who only know how to do mortgage lending assignments are reluctant to market themselves outside that confined space. They then become collateral damage recipients that they themselves control.
I tell people “everything in life is cyclic.” Nothing is really ‘new.’ We keep implementing the same prior mistakes, because we think things are different now versus what they were before. When you study recorded history, across continents and cultures, you will find this is true.
The problem for us currently is we can’t tell when the current cycle we are in will begin reversing. The cloudy and slightly cracked crystal ball I consult indicates it will be not changing soon. My presumption is it’s going to take a high-level administration change to begin that process. But, how many of ‘us’ remain in appraisal work when that happens is the unknown element in this discussion.
Best wishes to all of you.