Appraisal Institute advocates for appraiser professionals

The year ahead will hold many changes, challenges and opportunities for both residential and commercial real estate appraisers. However, one constant remains: Appraisal Institute designated members have the experience which makes a difference when you need a credible appraisal. The country is in the midst of taking necessary steps to continue on the track of recovery from the worldwide financial crisis which remains a challenge to many personal and professional lives. For appraisers, these economic difficulties are compounded by regulatory changes that impact the way residential and commercial appraisers conduct their business. Designated appraisers have successfully navigated all of these challenges and offer meaningful analyses and insights for institutional and private clients alike. Over the past year, the commercial real estate market started the year with a boom and ended with a whimper due to uncertainties over the election and the looming Fiscal Cliff. After a slump of several years, the commercial real estate market has reflected moderate improvements and continues to gain ground with positive absorption in most asset classes. The market reflected rising values in toptier markets for trophy office and other core properties. Yet, it was a bifurcated market and secondary and tertiary markets and properties were largely ignored by this activity. In this type of market no one pays a premium for uncertainty. And thus as the year ends and a new one begins, investors cautiously re-evaluate their strategies for this year and the foreseeable future. The residential real estate market reflected positive gains during 2012, with sales of single family homes through October exceeding all sales for 2011 according to the Warren Group. Both sales and pricing have shown increases due to some job growth, a slowly improving economy, and availability of low interest rate financing. For housing, the money has been available but underwriting standards have become more rigorous. Recovery in the housing market is one key indicator of the health of overall economy. In the multi-family world, investors continue to favor this asset class. As we begin 2013, Congress struggles to reach agreements on policies and spending cuts. We have averted the so-called Fiscal Cliff for the moment, but this pales in comparison to the next few months if Washington fails to reach an agreement on raising the debt ceiling and averting yet again the threat of default, another downgrade, and ensuing impacts in the financial markets. According to U.S. Treasury Secretary Timothy Geithner, the nation has reached its debt limit at the end of 2012 and is taking special measures to hold off the limit, buying (pun intended) a few months of time. So we are left asking ourselves the following questions: What is so systematically wrong with our national spending? Can we grow our way out of this? Where is the bi-partisan leadership that is required to reverse the on-going spending crisis? Is the current track unsustainable over the longer term? Is Washington spending our country into oblivion and if so, what can we do about it? All eyes will be on DC in January and the coming months, awaiting the short term resolutions necessary and expected to restore business and consumer confidence for now. What does this economic backdrop mean for real estate? If Congress can take the necessary steps to restore business and consumer confidence, we should see a continuation of slow and gradual recovery in residential and commercial real estate markets as investors seek, in relative terms, safer havens than more volatile stock and bond markets. The Fed is expected to keep interest rates artificially low until 2015. However, it is now 2013, and 2015 is not that far away; it is only two years out and is within a typical holding period. Prudent and responsible loan underwriting and other analyses would account for an expected interest rate rise, as the check for the spending party eventually comes due. The current deal, the Taxpayer Relief Act, is expected to add $4T to the deficit in 10 years and is estimated to cut GDP growth to 1% in Q12013 per JPMorgan and other forecasts. Therefore, a recession may be avoided for now, but growth prospects may well become curtailed over time if mounting deficits are left unabated . Weak economic growth can ultimately be expected to adversely impact financing and transactions and pricing. Higher interest rates are seen by most as inevitable. Other factors adding to this complex picture are, of course, the economic difficulties of the Eurozone, underscoring the fact that we are participants in an ever increasing global economy and global real estate scene. Regulators, bankers and borrowers will be seeking quality appraisals by experienced appraisers who know how to appraise in an ever changing market with potentially limited comparable data. They will be looking for appraisers with designations that show their commitment to the profession and that indicate they are well informed and up-to-date with the most current market considerations. The MAI and SRA designations are the most recognized and respected professional designations in the industry. Now, more than ever, appraisers should consider membership in the Appraisal Institute. Existing members are urged to become involved and work to make the organization even stronger. The Appraisal Institute is working hard for its members in these challenging and uncertain times. We offer new courses reflecting high interest and timely topics. We also offer seminars on a regular basis that cover the current economic climate. The Appraisal Institute's national office continues to lobby on Capitol Hill for legislators to recognize the need for quality appraisal and valuation services. The Appraisal Institute is the first bulwark in Congress for the appraisal industry. Our national office is on top of all legislation impacting appraisers and making sure appraiser concerns are heard. All of these combined efforts contribute to a protection of the public interest and a healthier economy. Please join us at our next meeting at the Federal Reserve Boston on January 15th. The topic is "Economic Outlook and Real Estate Trends for 2013." This is one of our most popular programs of the year and is usually sold out. We look forward to seeing you there! Karen Hanlon, MAI, MRICS is the 2013 president of the Massachusetts and Rhode Island Chapter of the Appraisal Institute, Boston.