Economic Impact of HVCC

In the last issue, we discussed the size of the overall appraisal fee business in the lead article ("How Big is the Appraisal Pie?"). Logically, the next step is to consider what amount of damage is done to that market by the HVCC.

As the prior article noted, the market size is $6.3B to $6.5B dollars overall. Looking at an average fee reduction of 50% from prior independent rates (both from bulk negotiated rates to lenders and from the actual fee split with the appraiser), that would put the income lost at roughly $3.2 billion.

However, there are two major but less-apparent impacts of that loss that make it even more devastating.

The first aspect deals with economic impact of a given amount of payroll. The $3.2B figure is the total payroll loss to appraisers. But in any industry, when payroll goes down, the spending power of the affected economy shrinks by an amount even greater, since as that previous payroll was spent locally, it had a ripple effect on those who received the expenditures. So, $100 taken out of an appraiser's pocket has a wider impact than just the original $100, as the local dry cleaner that the appraiser used also makes and spends less afterward, as does the nearby restaurant, and the grocery store, and so on. The ratio of the $100 to the actual larger decrease in overall spending power is called the "economic impact multiplier".

While local economic impact multipliers tend to vary due to differences in spending patterns, research shows that a defensible nationwide rate hovers around 1.6 to 2.0, with 1.8 being often cited as a preferred rule of thumb. That would place the overall damage from the shift to foreign and out-of-state AMCs at roughly 1.8 times the $3.2B number, or approximately $5.8 billion dollars. (pq)

The second aspect deals with measuring the number of lost jobs. The average appraiser makes a lot more money than the average wage earner, even in the richest states in the nation. Based on the most recent state-by-state average personal incomes for 2007 as reported by the government's Bureau of Economic Analysis, losing 100 appraisers is the equivalent of losing anywhere from 150 average wage earners in Connecticut (the highest average income in the nation) to losing 289 average jobs in Mississippi (the lowest average personal income). The table here shows the state-by-state job loss equivalents.

When talking to the media or to local and national politicians, it's essential that we make it clear that this isn't just a little "appraisal issue". In some large states, the economic impact and the job loss figures are equivalent to losing a military base or a major manufacturing plant. (Look at California, where it's equivalent to losing over 9,800 jobs and over $700 million in economic impact.)

So remember: Money talks, and the amount of money transferred out of state, out of the country, and out of the hands of individuals is substantial. This affects everyone, not just appraisers.

Editor's Note:  You can find resources to help you communicate with your elected officials at, including print-able versions of the US map and state-by-state impact chart above.  Click on the "Resources" tab on the left of that website, or just click here.