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A National Profile of the Real Estate Industry and the Appraisal Profession by J. Reid Cummings and Donald R. Epley, PhD, MAI, SRA

FEATURES

T J- he

he real estate industry has been devastated on many fronts' in the years following the Great Recession, whieh began in 2007^ due to the bursting of the housing bubble and the subsequent finaneial crisis relating to the mortgage market meltdown.' The implosion of the mortgage markets initially began when two Bear Stearns mortgage-backed securities hedge funds, holding nearly $10 billion in assets, disintegrated into nothing.* Panie quickly spread to financial institutions that could not hide the extent of their toxic, subprime exposures, and a massive, worldwide credit squeeze ensued; outright fear soon replaced panic. Subsequent eredit tightening and substantial illiquidity in the financial markets rapidly and severely affected the housing and construction markets.' Throughout the United States, properties of all kinds saw dramatic value declines.

In thousands of cases, real estate foreclosures disrupted people's lives, forced businesses to close, eaused financial institutions to falter, capsized wbole market segments, devastated entire industries, and squeezed municipal and state government budgets dependent upon use and property tax revenues.* While the effeets of property value declines and the waves of foreclosures in markets across the country captured most of the headlines, one significant impact of the upheaval in US real estate markets has gone largely unreported: its impact on employment in the real estate industry, and specifically, the real estate appraisal profession.

This article presents a

current employment

profile of the US real

estate industry, with

special attention given

to appraisal profes-

sionals. It serves as an

informative picture of

the appraisal profession

for use as a benchmark

for future assessment

of growth. As a

component of the real

estate industry, the

appraisal profession

ranks as the smallest

in employment, is

highly correlated to

movements in empioy-

ment of brokers and

agents, and relies on

commerciai banking,

credit, and real estate

lessors and managers

to deliver its products.

1. James R. DeLisle, "At the Crossroads of Expansion and Recession," TheAppraisalJournal 75, no. 4 (Fall 2007): 314-322; James R. DeLisle, "The Perfect Storm Rippiing Over to Reai Estate," The Appraisal Journal 76, no, 3 (Summer 2008): 200-210.

2. Randaii W. Eberts, "When Wiii US Empioyment Recover from tiie Great Recession?" International Labor Brief 9, no. 2 (2011): 4-12 (W. E. Upjohn Institute for Employment Research): Chad R. Wilkerson, "Recession and Recovery Across the Nation: Lessons from History," Economic Review 94, no. 2 (2009): 5-24.

3. Kataiina M. Bianco, The Subprime Lending Crisis: Causes and Effects of the Mortgage Meltdown (New York: CCH, inc., 2008): Lawrence H. White, "Fédérai Reserve Policy and the Housing Bubbie," in Lessons From the Financial Crisis: Causes, Consequences, and Our Economic Future, ed. Robert W. Koib (Hoboken, NJ: John Wiley & Sons, Inc., 2010), 453-460.

4. John Bellamy Foster, "The Financialization of Capital and the Crisis," Monthiy Review 59, no. 11 (Aprii 2008): 1-19.

5. Major Coleman iV, Michael LaCour-Littie, and Kerry D. Vandeii, "Subprime Lending and the Housing Bubbie: Taii Wags Dog?" Journai of Housing Economics 17, no. 4 (2008): 272-290.

6. Dean Baker, "The Housing Bubbie and the Financiai Crisis," Rea/-Wor/d Economics Review no. 46 (2008): 7 3 - 8 1 .

ANationaLRrMlejlîheBeaLIstatdflctustry^ancIth&Apprms.aJ.ErofessLaa. _IJhe Appraisal Journal, Spring 2013

Hundreds of thousands of professionals are involved in brokering, leasing, managing, appraising, and developing all property types. Service professionals include residential sales agents, multifamily-property managers, commercial investment advisors, industrial property brokers, land developers, property appraisers, and many others.^ Their professional education and training includes academic work performed in colleges and universities; industry-specific education and training programs; advanced professional association development and designation certifications; company and franchise training; pre- and post-licensing continuing education requirements; and many years of on-the-job training and experience.

The disintegration of the housing and financial markets has affected all professionals in the real estate industry and its employment components. This article shows professional real estate appraisers have been particularly hard hit. Before the recession, as property values and sales grew, and as demand for loans increased, appraisers' workloads did as well. When the bubble burst, appraisers felt its impact and experienced significant declines in their businesses. As a result, the real estate appraisal industry experienced a significant loss in jobs. Recent growth in employment within the appraisal profession has neither mirrored other sectors in the real estate industry, nor that of the US economy.

The purpose of this article is to provide a cross- sectional view of the national real estate industry with special attention given to employment in the appraisal profession. Nothing in the professional literature attempts to establish a data-driven profile of the appraisal business, or compares and contrasts it to other real estate-related professions. This article is not a survey, but rather an effort to establish a basic real estate appraisal employment baseline that will serve as a benchmark for future trend comparisons. This profile uses the latest data estimates from private, state, and federal sources in support of regional input-output tables used for the estimation of economic impacts from events in a region.^

The results indicate that overall real estate industry employment at the end of 2011 was higher than at the beginning of 2001. However, the trend of annual increases in the number employed evident in the early years of the 2001—2011 study period reversed itself during the recession. Declines in employment appear to coincide with concurrent declines in the economy during the latter years of the same period. The results further show a significant correlation between employment in the real estate appraisal profession and production measures of the national economy, but not with national employment This research is not only very timely, it also is extremely important because changes in the employment trends in the real estate industry since the financial crisis began have been substantial. The information and analysis presented offer unique insights into understanding the current state of the real estate industry, and in particular, the real estate appraisal profession.

Employment Profile and Trends This article examines national employment trends in five real estate-related categories:

• Agents and Brokers • Appraisers • Lessors and Lessors' Agents • Property Managers • Other Services (i.e.. Escrow Agents, Consultants,

Fiduciaries, Asset Managers, and Listing Services)

It extracts the data according to the North American Industry Classification System (NAICS) at the six-digit code level across all real estate-related cat- egories for the period 2001—2011.'' Each category draws from information provided by the US Census Bureau NAICS category definitions.

Agents and Brokers The industry classification Offices of Real Estate Agents and Brokers (NAICS Code 531210) includes people primarily engaged in acting as agents and/or brokers in one or more of the following: (1) selling real estate for others, (2) buying real estate for others.

7. Association of Real Estate License Law Officiais, Digest of Real Estate License Laws and Current Issues (Chicago: Association of Reai Estate License Law Officiais, 2011).

8. Proprietary data obtained by paid license from Economic Modeiing Speciaiists. Intl. For information on purchasing licenses enabling information access, see http://www.economicmodelihg.com.

9. NAICS codes adopted by several government agencies such as the US Bureau of Ecohomic Analysis and the US Bureau of Labor Statistics for the standardization and reporting of data such as employmeht ahd income. Further expianation of the accounts used ahd specialties covered is shown in the Appendix at the end of this articie.

appraisai Journal, Spring 2 0 1 3 , ^ -EcoJile Qflhe

and (3) renting real estate for others. Figure 1 shows that at the end of 2001,1,061,482 people in the United States worked in Offices of Real Estate Agents and Brokers. At the end of 2011,1,717,627 people worked in this classification, or 61.8% more than in 2001. The annual employment number increased each year in 2001-2007, peaking in 2007 at 1,857,576. However, coinciding with the beginning of the recession, the number of people in this classification began to decline, and the annual decreases continued until a slight increase occurred in 2011 over 2010.

Two caveats are noteworthy. First, substantial increases in employment during the early years of the period may be due to entry of new licensees hoping to capitalize on the potential income opportunities provided by Üie booming, pre-financial crisis real estate markets. Therefore, tbe sharp growth trend may have been an unsustainable anomaly. Second, the data does not differentiate between those licensed professionals who work full-time versus those who only work part- time. Therefore, some portions of categorical declines in the post-flnancial crisis economy may be due to part-üme licensees choosing not to renew their licenses during the economic downturn.

Appraisers The industry classification Ofiices of Real Estate Appraisers (NAICS Code 531320) includes people

primarily engaged in estimating the fair market value of real estate. Figure 2 shows that at the end of 2001,80,724 people in the United States worked in this classification. At year-end 2011,111,253 people worked in this classificaüon, or 37.8% more than in 2001. The annual employment number increased each year in 2001-2007, peaking in 2007 at 118,657. In addition, again coinciding with the beginning of the recession, the number of people in this classifica- tion began to decline, and the decreases confinued through 2011.

Although the percentages of growth in this category are different from those of the category Offices of Real Estate Agents and Brokers, it is possible the explanafions are similar. The booming real estate markets prior to the financial crisis increased demand for appraisals, and therefore, more people entered the profession. Likewise, as the markets slowed after the crisis began and appraisal demand declined, so did the demand for appraisers. Due to the reduced demand, some licensed appraisers may have sought other types of employment, or suspended or terminated their licenses. Further, some lenders, especially those focusing on the residential mortgage sector, increased use of alternafive valuation products or turned to using broker price opinions (BPOs).'"

Figure 1 US Offices of Real Estate Agents and Brokers (NAICS Code 531210)

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10. So many real estate brokers began performing BPOs after the financial crisis that in IVlay 2011, the National Association of Realtors (NAR) introduced a new BPO training and certification program. Information obtained from the Nationai Association of Reaitors available at http://www.realtororg/rmodaiiy. nsf/pages/News2011051306.

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Figure 2 US Offices of Real Estate Appraisers (NAICS Code 5 3 1 3 2 0 )

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Lessors and Lessors' Agents The industry classification Lessors of Residential Buildings and Dwellings (NAICS Code 531110) includes people primarily engaged in acting as les- sors of buildings used as residences or dwellings, such as single-family homes, apartment buildings, and townhomes. Included in this classification are owner-lessors of residential buildings and dwellings or people employed by them.

Figure 3 shows that at the end of 2001, 683,905 people in the United States worked as Lessors of Residential Buildings and Dwellings. At year-end 2011,1,057,764 people worked in this classification.

or 54.7% more than in 2001. The annual employment number increased each year in 2001—2007, peaking in 2007 at 1,083,847. However, coinciding with the beginning of the recession, the number of people employed in this classification began to decline, dipping slighüy in 2008 and 2009. The trend reversed in 2010 and 2011.

The industry classification Lessors of Non- Residential Buildings (NAICS Code 531120) includes people primarily engaged in acting as lessors of huildings (except mini-warehouses and self- storage units) that are not residences or dwellings. Included in this industry sector are owner-lessors

Figure 3 Offices of US Lessors of Residentiai Buildings and Dwellings (NAICS Code 5 3 1 1 1 0 )

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of non-residential buildings and people employed by tbem.

Figure 4 shows that at the end of 2001, 369,301 people in the United States worked in the Lessors of Non-Residential Buildings classification. At year- end 2011, 493,600 people worked in this industry classification, or 33.7% more than in 2001. The annual number of people increased each year in 2001—2005, decreased slightly in 2006, and increased in 2007 and 2008, when it peaked at 510,576. Thereafter, the annual number of people employed in this classification decreased each year in 2009—2011.

The industry classification Lessors of Mini- Warehouses and Self-Storage Units (NAICS Code 531130) includes people primarily engaged in renting or leasing self-storage space (e.g., rooms, compartments, lockers, containers, or outdoor space) where clients can store and retrieve their goods. Figure 5 shows that at the end of 2001, 132,064 people in the United States worked as Lessors of Mini-Warehouses and Self-Storage Units. At the

end of 2011, 280,702, or 112.6% more than in 2001, worked in this classification.

The annual number of people in this classification increased each year in the study period except for 2009, when it decreased shghtiy by -2,393, or -0.86% less than 2008. A possible explanation for the strong growth performance could be a combination of Americans continuing to accumulate more material possessions and the downsizing of residences, increasing the need for storage of their possessions. Another explanation might be that foreclosures forced people to place their possessions in storage as they transitioned to other residences.

The industry classification Lessors of Other Real Estate Property (NAICS Code 531190) includes people primarily engaged in acting as lessors of real estate (except buildings), such as manufactured- home sites, vacant lots, and grazing land. Figure 6 shows that at the end of 2001,125,915 people in the United States worked as Lessors of Other Real Estate Property. At the end of 2011,146,858 people, or 16.6%

Figure 4 Offices of US Lessors of Non-Residential Buildings (NAICS Code 5 3 1 1 2 0 )

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Figure 6 Offices of US Lessors of Other Real Property (NAICS Code 531190) pi

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more than in 2001, worked in this classification. The increases and decreases in the number of people in this classification are inconsistent, showing increases in 2001-2005,2007, and 2010, but decreases in 2006, 2008-2009, and 2011.

Property Managers The industry classification Residential Property Managers includes people primarily engaged in managing residential real estate for others. Figure 7 shows that at the end of 2001, 178,244 people in the United States worked in this industry classification, and atthe end of 2011,289,706 people, or 62.5% more than in 2001, worked in this classification.

During 2001—2011, the number of people in tbis classification increased each year, with the highest annual increase (10.7%) occurring in 2007, which coincided with the beginning of the recession. The 10.7% increase in 2007 was the only double-digit

increase during the study period. One possible explanation for this is that 2007 was the first year people began losing their homes to foreclosure hecause of the recession. As the demand for rental units increased due to increased home foreclosures, there may have been a eommensurate inerease in tbe need for residential managers. Anotber explanation could be that more apartment eomplexes came on line in 2007 due to the rapid expansion of eonstrucüon of multifamily units in the middle part of the decade, resulting in employment of more residential property managers.

The industry classification Non-Residential Property Managers (NAICS Code 531312) includes people primarily engaged in managing non- residential real estate for others. Figure 8 shows at the end of 2001, 83,213 people in the United States were employed as Non-Residenüal Property Managers. At the end of 2011,130,346 people, or 56.6% more than in 2001 worked in this classification.

ppraisal Journal, Spring 2013. A National Profile of tlie^R&aJ £state.iDáiistry,.aad the Appraisal Profession

Figure 8 Offices of US Non-Residential Property IVIanagers (NAICS Code 5 3 1 3 1 2 ) P

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With the exception of 2009-2010, when growth was relatively flat, the number of people working in the Non-Residential Property Managers classification increased during the study period, with the highest annual increase (9.4%) occurring in 2008. A possible explanation for the significantly higher increase in 2008 is that demand for asset managers increased due to the increased foreclosures of non-residential properties. Another possible explanation is that demand for commercial real estate was increasing in the years prior to the financial crisis—peaking in 2008—and thus, more real estate firms employed more non-residential property managers to service the industry. It is important to note that because this NAICS industry classification includes only those managing non-residential real estate for others, property management services for owner-occupied properties are not included.

Other Real Estate Activities The industry classification Other Activities Related to Real Estate (NAICS Code 531390) includes people primarily engaged in performing real estate-related services (except lessors of real estate, olfices of real estate agents and brokers, real estate property man- agers, and offices of real estate appraisers). Figure 9 shows that at the end of 2001, 592,155 people in the United States worked in Other Activities Related to Real Estate. At the end of 2011, 852,824 people, or 44% more than in 2001, worked in this classification.

The e m p l o y m e n t growth t r e n d of this classification is similar to the growth trend in the

classification Offices of Real Estate Appraisers. The annual number increased each year in 2001—2005, and peaked in 2007 at 890,100. Coinciding with the beginning of the recession, the number of people employed in this classification then began to decline and the decreases continued through 2011.

Correlations and Summary The analysis in this article compares employment categories of the appraisal profession to other seg- ments of the real estate industry and various national economic indicators. The statistical test used is a simple correlation analysis utilizing the Pearson" method to produce correlation eoefiicients between the appraisal profession and other segments of the real estate industry. The purpose of performing this statistical test was to uneover strong and weak relationships with other parts of the eeonomy that could serve as future indieators of the welfare of the appraisal profession.

Correlation analysis examines the degree to which relationships exist between variables. Correlations, labeled as eoefiicients, are numbers between -1 and +1. A coefficient between 0 and +1 suggests a positive relationship between the variables, whereas a coefficient between -1 and 0 suggests a negafive one. Correlation analysis helps reduce the range of uncertainty about the relaüonships between the variables. Hence, correlation analysis produces greater variance of the predieted outcomes—how much movement of one variable is related to movement of another variable—that are eloser to

1 1 . Joseph F. Hair Jr., Mary Wolfinbarger Ceisi, Arthur Money, Phillip Samouel, and Michael J. Page, Essentials of Business Research Methods, 2nd ed. (Armonk, New York: M. E. Sharpe, inc., 2011).

^ ^ The Appraisai Journai, Spring 20:

Figure 9 US Offices of Other Activities Related to Real Estate (NAICS Code 531390) P

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reality. A simple correlation is between two variables. Perfect correlation exists between two variables when the correlation coefficient is either +1 or - 1 .

Table 1 shows the correlation analysis results for the study.'̂ They reveal a posifive relationship between the appraisal profession and the other sectors. The highest correlafion of+0.998 was with the classification Offices of Real Estate Agents and Brokers, which was statistically significant at the 0.01 level (this means that 99.8 times out of 100, this relationship will exist and will be highly, posifively correlated). Also, a strong, positive relationship of +0.997 was revealed with the classification Residential Property Managers, which was highly significant at the 0.01 level. The interpretation is that as employment in the sectors identified goes up or down, employment in the appraisal profession will do likewise.

The analysis leads to the following conclusions related to the Real Estate Appraisers classificafion:

1. The industry classification Real Estate Appraisers is the smallest among all real estate sectors examined, with 111,233 johs in 2011.

2. Employment increased annually from 80,724 in 2001 to a high of 118,657 in 2007, for a total increase of 37,933, or 46.99%.

3. Employment decreased annually from 118,657 in 2007 to a low of 111,233 in 2011, for a total

decrease of-7,424, or -6.3%. 4. During the study period, the largest annual

decrease was from 118,657 in 2007 to 114,397 in 2008, a decrease of-4,260 or -3.6%.

5. The smallest decrease, between 2009 and 2010, was -271 or -0.24%.

6. The most recent decrease, between 2010 and 2011, was-1,705 or-1.51%.

Total Requirements Needed to Operate The Bureau of Economic Analysis prepares and publishes a variety of economic statistics on indus- tries. Its data on total requirements represent the total demand for goods or services that an industry needs to produce its particular goods or services.'^

While other industries or resources operafing or existing within the region saüsfy some of the demand, in many instances not all of the requirements are satisfied from within the same region. This unsatisfied or leftover demand is satisfied through imports into the region. Thus, the total requirements equal the amount safisfied within the region plus the amount of imports into the region.

Figure 10 displays the US 2010 total requirements for real estate-related industries. Because this data is for the entire United States, the region is the entire country as well. The 2010 total requirements for all real estate-related sectors totaled over $1.09

12. The correlations shown in Table 1 are between people working in the appraisai profession and other real estate-reiated sectors.

13. The totai requirements (TR) technique does not derive estimates based on empioyment but instead focuses on the totai demand for goods or services that an industry needs in order to produce its particular goods or services. In the United States, the Department of Commerce's Bureau of Economic Anaiysis (BEA) produces two types of TR tables, in coefficient form, using benchmark input-output information drawn from make and use tables. The tables present input values of goods or services purchased directiy in order to produce one dollar of output. The coefficients of the TR tables provide the totai sum of direct and indirect inputs necessary to produce output. For example, the direct purchases (inputs) necessary to produce an airplane wouid inciude the steel and aiuminum used in the construction of the aircraft fuselage, and the indirect purchases wouid include the energy resources necessary to produce the steel and the aluminum. The different types of direct and totai requirements information produced by the BEA depend on whether the defined goods and services are industries or commodities. For a comprehensive explanation of the BEA's methodology and data-derivation techniques, refer to the BEA's Methodology Paper Series and other methodoiogies oh the nationai, industry, international, and regional accounts avaiiable at http://www.bea.gov/ methodoiogies/index.htm and articies pubiished in the Survey of Current Business avaiiable at http://www.bea.gov/scb/index.htm.

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Figure 10 US 2010 Real Estate-Related Total Requirements

Lessors of Residential Buiidings and Dwellings

Lessors of Non-Residential Buiidings

Offices of Reai Estate Agents and Brokers

Residentiai Property Managers

Other Activities Related to Real Estate

Non-Residential Property iVIanagers

Lessors of iViini-Wareinouses and Self-Storage Units

Lessors of Other Real Estate Property

Offices of Real Estate Appraisers

$0 $50 $100 Data reported in billions

$150 $200 $250

trillion. This number is significant relative to US gross national product (GNP) because the total requirements of all national real estate industry sectors in 2010 accounted for nearly 7.3% of GNP. Clearly, as an industry real estate is a critically important segment of the US economy.

The appraisal profession, relative to the other real estate-related sectors had the smallest total requirements in 2010 at $20.7 billion; this is less than one-third of the next largest sector, real estate management. Although the ranking is small relative to the others in the real estate industry, its magnitude is significant relative to the economic impact of consumption in the various markets throughout the country. Figure 11 displays the total requirements of all real estate-related sectors relative to the number of people working in each sector. This number, therefore, represents the total requirements or the total demand for all goods or services needed by a particular industry to operate, reported on a per-person basis within each of the real estate- related sectors illustrated. As shown, the 2010 total

requirements for Offices of Real Estate Appraisers per employee was $183,154.

Industries Serving Appraisai Data analysis provides an interesting profile of the national industries that sell goods and services needed by the appraisal profession to operate. Total require- ments data indicate that the total sales to the appraisal industry exceed $4.3 billion each year.'* The following are the top-seven industry segments seUing goods and services to the appraisal profession (sales exceeding $100 million to appraisal profession).̂ '̂

1. Commercial Banking—$365 million. This indus- try includes establishments primarily engaged in accepting demand and other deposits and making commercial, industrial, and consumer loans. Commercial banks and branches of for- eign banks are included in this industry.

2. L e s s o r s of R e s i d e n t i a l Buildings and Dwellings—$268 milhon.

3. Lessors of Non-Residential Buildings — $255 million.

14. As previously explained, total requirements are the total amount of dollars spent by an NAICS industry to produce its goods and services. Unfortunately, the data does not show the specific items purchased because the data tables are extracted using input-output analysis based only on industry-level information.

15. Proprietary data obtained by paid license from Economic iVlodeling Specialists, Inti. For information on purchasing licenses enabiing information access, see http://www.economicmodeiing.com.

The Appraisal Journal, Spring 201.3_

Figure 1 1 US 2010 Real Estate-Related Total Requirements Per Employee

Non-Residential Property Managers

Lessors of Non-Residential Buildings

Lessors of Other Real Estate Property

Residential Property Managers

Lessors of Mini-Warehouses and Self-Storage Units

Lessors of Residential Buildings and Dwellings

Offices of Real Estate Appraisers

Other Activities Related to Real Estate

Offices of Real Estate Agents and Brokers

5236,316

$218,383

$183,134

$123,062

$100,000 $300,000 $500,000 000

4. Offices of Real Estate Agents and Brokers— $232 million.

5. Real Estate Credit—$180 million. This industry includes establishments primarily engaged in lending funds with real estate as collateral.

6. Residential Property Managers—$123 million. 7. Other Activities Related to Real Estate—

$120 million.

These seven industry segments account for over $1.5 hillion in sales of goods and services to the appraisal industry.'" It is noteworthy that each of the seven industry segments detailed either is directly a part of the overall real estate industry or closely related to it

Correlations with US Economic Indicators As shown in Figure 12, US GNP increased each year during the study period, growing from $10.3 trillion in 2001 to $15.55 trillion in 2011." On the other hand, national unemployment tracked national economic recessionary trends more closely. As shown in Figure 13, the unemployment rate was 5.40% in 2001 and fell to a study-period low of 4.30%

in 2006.'** However, as the real estate and financial markets hegan reacting to the real estate market implosion that hegan soon after the financial crisis, so did unemployment. The overall national unem- ployment rate grew in 2008 to 7.10% and peaked at 9.70% in 2009.

The data show that even though the economy was in recession, and unemployment was rising during the latter part of the decade, US GNP continued to increase. This is puzzling and motivates inquiries as to why and how this happened. One possible explanation is that during the recession, in order to survive, businesses not only found ways to continue to be productive, they apparently found ways to increase productivity with fewer employees than before the crisis. Another possible explanation is that GNP increases resulted from substantial increases in federal government economic stimulus spending. However, the data also show that even though unemployment had declined to 8.30% at the end of 2011, the employment in the Offices of Real Estate Appraisers classification continued to decline. This suggests that employment growth in the

16. Data obtained from the US Census Bureau and found at iittp://www.census.gov/cgi-bin/sssd/naics/naicsrch.

17. Data obtained from the US Bureau of Economic Analysis and found at http://www.bea.gov.

18. Data obtained from the US Bureau of Labor Statistics and found at http://www.bis.gov.

Profile of the Real Estate Industry and ths ApRCaisaLPfQfessiOIL J U l f i Appraisal Journal, Spring 20:

Figure 12 US Gross National Product

a. <9

20.00 15.00 10.00

5.00 0.00

S s §

(0 in

ta o U)

tri

1 i i i i i i i i i

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Year

Figure 13 US Unemployment Rate

- . 12.00%

T 10.00%

I 8.00% I 6.00% 5" 4.00% I 2.00% = 0.00%

2001 2002 2010 2011

appraisal profession as ofthat date had not improved relative to the overall national eeonomy and GNP.

The eorrelaüon analysis estimated the degree of strength of the relationship between national indicators and real estate sectors, with particular attention paid to the appraisal profession. As expected, there was a strong, positive relationship with GNP. The highest correlation, with a coefficient of-1-0.940 and statistical significance at the 0.01 level, was between the appraisal profession and GNP. While the relationship with the unemployment rate was positive, it was also the lowest in the analysis, with a statistically insignificant coefficient of-H0.406. This means that while there is a significant relationship between employment in the appraisal profession and growth or decline in the national economy, it is also relatively independent of movement in the overall national unemployment rate. It is possible that analysis of correlations between employment levels in the real estate-related sectors and the total amounts of inventory of housing or commercial real estate might be meaningful. However, as this research did not pursue such an analysis due to data limitations, future study might address this question.

Conclusion The purpose of this article is to report information on the state of the real estate profession in the United States, with specific attention paid to the appraisal profession for the period 2001—2011. The analysis reveals several interesting results. First, overall real estate industry employment at the end of 2011 was higher than at the beginning of 2001. Second, the trend of annual employment increases evident in the early years of the period studied began to reverse after the financial crisis. Third, declines in employ- ment in the real estate profession coincide with the declines in the overall national economy. Fourtb, recovery in employment in the appraisal industry remains weak relative to the real estate profession and overall employment in the national economy.

Thus, the conclusion is that during the time studied macroeconomic factors impacting US real estate markets directly correlated with reductions in the number of people employed in most categories of employment in the real estate profession and, even more so, in the real estate appraisal segment of the real estate industry. The results are both timely and important because they illustrate substantial changes

The Appraisai Journal, Spring 2013_

•Ti •

in the real estate profession and the appraisal sector in particular. As economic conditions improve, understanding recent employment trends will better equip new employers and businesses considering expansion to identify potential gaps and to capitalize on growth opportunities.

This article offers unique insight into the current state of the real estate industry, how the various segments within it have adjusted to the changes in the real estate markets in the United States, and the likely directions employment might take in the future. This information should be particularly useful to those in the real estate appraisal profession as the data suggests that opportunities for future growth do exist due to an overall reduction in the number of people employed in this area in recent years.

J. Reid Cummings, is a doctorate student, with a finance concentration, in the Coles College of

Business doctor of business administration program at Kennesaw State University in Kennesaw, Georgia.

He earned a bachelor of arts in political science from the University of North Carolina at Chapel Hill, and a master of business administration, with honors,

from the University of Mobile. He serves as adjunct faculty member in the Mitchell College of Business at the University of South Alabama (USA) in Mobile, Alabama. He also serves as senior researcher and

project analyst in the USA Center for Real Estate and Economic Development. Cummings is president

of The Cummings Company and The Chamberlin Company in Mobile, Alabama. For over 30 years,

he has been active in the real estate development, brokerage, leasing, management, mortgage, and con-

struction industries. Contact: [email protected]

Donald R. Epiey, PhD, MAI, SRA, is a professor of marketing and e-commerce and the current holder of

the USA Distinguished Professorship in Real Estate at the University of South Alabama in Mobile, Alabama.

He also serves as director ofthe Mitchell College of Business Center for Real Estate and Economic Development. He is a licensed real estate broker

and a certified general appraiser. Epiey is the author and coauthor of 8 textbooks and over 100 referreed journal articles. He was the editor of the Journal of

Real Estate Research and has served on its editorial board since its creation. He holds the CCIM designa-

tion from the Commercial and Investment Real Estate Institute and the MAI and SRA designations from

the Appraisal Institute and serves on the Academic Review Panel of The Appraisal Journal. Contact: dep-

[email protected]

This project was partially funded by a federal grant

from the Economic Development Partnership of Alabama. The authors wish to express their

sincerest thanks to Joseph F. Hair, PhD, Lucy F. Ackert, PhD, Christopher H. Newman, PhD, Ken H.

Johnson, PhD, Edmond G. Eslava III, MAI, Madeleine L. Downing, MAI, and three anonymous referees

for their helpful comments and suggestions.

All errors and omissions are our own.

A NationaLfrMla _The Appraisal Journal, Spring 2013.

Appendix

This article uses US Bureau of Labor Statistics data as provided by Economic Modeling Specialists, Intl. (EMSI). EMSI uses the NAICS coding system in the development of its database that includes data from other federal and state surveys, inclu- sive of economic base analysis, jobs by industry scenarios, and economic impact analyses. The primary emphasis in this article is on people

employed in the real estate appraisal profession. As shown in the tahle helow, at the two-digit level, the US real estate profession is contained in NAICS account number 53, labeled as Real Estate and Rental and Leasing. As shown in the table below, at the six-digit level the US appraisal profession is contained in NAICS account number 531320, labeled as Offices of Real Estate Appraisers.

NAICS Industry Classification 53 531 5311 53111 531110 53112 531120 53113 531130 53119 531190 5312 53121 531210 5313 53131 531311 531312 53132 531320 53139 531390

NAICS Level

1 2 3 4 5 4 5 4 5 4 5 3 4 5 3 4 5

CJ l

4 5 4 5

NAiCS Industry Classification Description

Real Estate and Rental and Leasing

Real Estate

Lessors of Real Estate

Lessors of Residential Buildings and Dwellings

Lessors of Residential Buildings and Dweilings

Lessors of Nonresldential Buildings (except Mini-warehouses)

Lessors of Nonresidential Buildings (except iVlini-warehouses)

Lessors of IVlini-warehouses and Self-Storage Units

Lessors of Mini-warehouses and Self-Storage Units

Lessors of Other Reai Estate Property

Offices of Real Estate Agents and Brokers

Offices of Reai Estate Agents and Brokers

Offices of Real Estate Agents and Brokers

Activities Related to Real Estate

Real Estate Property Managers

Residential Property Managers

Nonresidential Property Managers

Offices of Reai Estate Appraisers

Other Activities Related to Real Estate

Web Connections Internet resources suggested by the Y. T. and Louise Lee Lum Library

Appraisal Institute—Faet Sheets http://www. appraisalinstitute. org/newsadvocacy/FactSheets. aspx

Appraisal Subcommittee of the Federal Financial Institutions Examination Council—National Registry https.y/www.asagov/National-Registry/NationalRegistry.aspx

US Census Bureau—American FactFinder http://factfinder2.census.gov/main.html

US Department of Housing and Urban Development—Appraiser Roster http://www.hud.gov/offices/hsg/^/fl Ic/fl 7appr_xmlhlp.qfm

he Appraisal Journal» Spring 2O13._

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