Appraisal Awards by Lenders in Q3 increase by 18.3% YoY
The third quarter of 2024 continued the slow growth trend in lender-driven appraisal demand of the previous two quarters. Appraisal award volume in the LightBox Collateral360®/RIMS® platforms increased by 18.3% compared to one year ago, and by a more modest 0.3% over Q2. In an early sign of the lending and investment engines gaining steam, the LightBox Appraisal Activity Index rose to 67.1 in Q3, a 3.2-point increase over Q2.
These results are consistent with the September LightBox CRE Activity Index, an aggregate measure of activity in functions that support commercial real estate (CRE) transactions, which reached 98.2, an increase of 8.3 points over August and a more significant 10.3 points compared to one year ago.
For appraisers eager to benchmark their own Q3 2024 activity against industry benchmarks, our Q3 CRE Market Snapshot for the appraisal segment highlights the latest trends and forecasts:
- The LightBox Appraisal Index rose for the 3rd consecutive quarter, reaching 67.1, an increase of 3.2 points above Q2 and well above 58.3 one year ago.
- Appraisal award volume (on a dollar basis) was relatively flat in Q3 compared to Q2, but up a significant 18.3% year over year, largely due to selective lending and an uptick in appraisals related to loan maturities.
- The average appraisal fee per lender project decreased slightly to $3,185 in Q3 compared to Q2 but rose nearly 5% compared to $3,044 one year ago.
- The average turnaround time on an appraisal project continues to tighten, averaging 13.3 days in Q3 compared to 14 days in Q2 and 13.8 days one year ago.
Q4 Forecast Not Without its Headwinds
The latest prediction from the Mortgage Bankers Association (MBA) is that total commercial and multifamily mortgage borrowing and lending will rise by 26% this year, reaching $539 billion compared to $429 billion last year and $665 billion in 2025. Given that Q2 lending increased only 3% year over year, the MBA is anticipating a significant uptick in lending and refinance activity now that rates are falling. While short-term borrowers could hold off for future rate cuts, long-term investors are likely to move in quickly to take advantage of a growing number of opportunities while liquidity is still constrained. Barring some unforeseen market shock or a round of discouraging data on inflation or the labor market, the Fed will continue to cut rates.
LightBox Appraisal Index (Base Q1 2021=100)
The Q4 Appraisal Index forecast is based on the prediction of two quarter-point rate cuts at the Fed’s November and December meetings and the expectation of the moderate increase in appraisal activity that traditionally accompanies an easing of monetary policy. Despite the market’s challenges and risks, the September rate cut triggers the start of a new growth cycle for CRE. As the market gets more clarity on the future path for interest rates, sentiment will improve, and buyers and sellers will be better equipped to pencil out deals in a way that they couldn’t earlier in the year. What should follow is a period of more pricing certainty, greater access to capital, more transactions, and a renewed cycle of redevelopment as CRE continues to respond to evolving demand for space.
The LightBox CRE Market Snapshot Series, Q3 2024—Focus on Lender-Driven Appraisal Trends—presents data from more than 1,200 banks and credit unions across the United States and reflects industry benchmarks specific to lender-driven commercial property appraisal activity. The data are derived from LightBox applications Collateral360 and RIMS, which are used by financial institutions to manage and procure appraisals in support of property lending activity. The LightBox CRE Activity Index combines appraisal activity with environmental site assessments from LightBox EDR and property listings in LightBox RCM to create a composite of CRE transaction activity.
For more information about this report series or the data, email Insights@LightBoxRE.com
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