The subprime crisis slowed real estate activity and, thus, the need for appraisals
Los Angeles, CA (PRWEB) August 03, 2012
Operators in the Real Estate Appraisal industry estimate the fair market value of real estate property when it is bought, sold, mortgaged, developed, improved, insured, disputed or taxed. Just less than 60.0% of industry revenue is generated from servicing the financial sector; the balance comes from servicing law offices, private owners and buyers and, to a lesser extent, government and accounting clients. Over the five years to 2012, industry revenue is expected to have fallen at an annualized rate of 1.4% to $6.2 billion. The subprime crisis and ensuing recession resulted in what IBISWorld industry analyst Eben Jose calls “a dramatic decline in property values, transaction volumes and development activity across the residential and nonresidential real estate markets in the United States,” which caused demand for appraisal services to dwindle. In 2012, however, IBISWorld expects that industry revenue will grow 4.7% as the volume of real estate transactions increases and property values continue to recover from the recessionary lows of 2009.
The industry now employs an estimated 83,231 people compared to 86,782 in 2007, at the start of the subprime crisis. “Workforce reductions are just one strategy industry operators used to cut costs and maintain profit margins over the past five years,” says Jose. Other cost-cutting initiatives included reducing commissions, disposition of unprofitable assets and a slowdown in merger and acquisition activity. These measures and improved economic conditions are expected to lead to a widening of profit margins, which fell from 19.2% in 2007 to 12.3% in 2011. Despite an anticipated increase in margins over the current year, industry profit fell during the past five years. The Real Estate Appraisal industry is highly fragmented; the largest player, CB Richard Ellis Group Inc., controls less than a tenth of the market.
In the five years to 2017, IBISWorld projects that the Real Estate Appraisal industry will grow at a healthy clip. Industry performance will be supported by recovery in the downstream real estate markets and increases in development and investment activities. But even though industry revenue is expected to rise, profit growth will likely be hindered by the use of centralized property databases (computing programs that can do the job of an appraiser) and the growing popularity of appraisal management firms (which often require appraisers to work for lower fees). Wages and employment growth will also be slower as a result of these growing trends. For more information, visit IBISWorld’s Real Estate Appraisal in the US industry report page.
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IBISWorld industry Report Key Topics
Operators in this industry specialize in estimating the fair market value of real estate. Appraisers research a property or development to determine the characteristics pertinent to its market value. Valuations for a property are carried out when it is sold, mortgaged, taxed, insured or developed.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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