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Real Estate Big Data

Alternative data is an intriguing, inventive new way to market

(REAL ESTATE BIG DATA) Alternative data is a wild ride with surveillance planes, satellite images, and specially equipped helicopters, and it’s not stopping anytime soon.

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Alternative data

The road less traveled has always been a little stranger and trust me, alternative data is a little strange. Buckle-up your seatbelts, it’s going to be a wild ride.

Data has always been a hot commodity. The digital world has made it easier than ever for investors to get their hands on all kinds of data. The problem is, if one person can gain access to a data set then nearly everyone else can too. So, how are investors supposed to get an edge over their competitors and make the best decisions in their power? Please welcome, alternative data to the stage.

First of all, what the heck is alternative data? According to alternativedata.org, it refers to “data used by investors to evaluate a company or investment that is not within their traditional data sources.” Alternative data is the road less traveled. It offers investors a way to add new and unique variables to the mix.

This data can be anything from private aircraft surveillance to satellite images of parking lots. Every bit of data that investors can gather to determine their next course of action has value. It gets wild, y’all.

In the oil and gas industry, one company uses helicopters decked out with infrared beams to estimate the amount of oil in storage tanks. It may sound like something out of a silly movie, but it’s actually quite clever.

So, is alternative data just an industry fad? Probably not, but what qualifies as this kind of data will evolve over time. As certain practices become more mainstream, they will lose that “alternative” edge. Kind of like when the band you’ve been following for years gets a hit song and now, they’re everyone’s favorite band.

What’s already clear is alternative data is not pixie dust. These creative data sets can provide an interesting insight, but it shouldn’t be the sole basis of any decisions. At the end of the day, alt data points are just more variables on the table. It’s best to not get caught up in the sexiness of private jets and satellites.

One thing is for sure, we will be seeing more creative uses of alternative data in the future.

Staff Writer, Natalie Gonzalez earned her B.A. in English and a Creative Writing Certificate from the University of Texas at Austin. She is a writer and social media nerd with a passion for building online communities.

Real Estate Big Data

Home sales improve in December and should pick up meaningfully in 2020

(REAL ESTATE BIG DATA) This past year has brought a lot of underlying trends to light about how the market is going, so using these factors how does 2020 look for home sales.

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2020 home sales

After a small dip in November, existing home sales improved 3.6% in December with all regions but the Midwest experiencing growth, according to the National Association of Realtors (NAR). Sales were up a whopping 10.8% compared to December 2018.

The median sales price in December was up 7.8%, hitting $274,500, growing in all regions and marking the 94th consecutive month of year-over-year increases. Good news for homeowners, but bad news for buyers, particularly first time buyers priced out of the market.

NAR’s Chief Economist, Dr. Lawrence Yun noted that price appreciation has accelerated and in areas of declining affordability, job growth is not keeping up with rising housing costs. “The hope is for price appreciation to slow in line with wage growth, which is about 3%,” Dr. Yun noted.

Further, as he has reiterated many times over the years, Dr. Yun notes that low inventory continues to plague the housing market. Total housing inventory at the end of December was 1.4 million units, down 8.5% for the year and 14.6% for the month as unsold inventory is at a three month supply at the current pace. This indicator is also problematic as unsold inventory totals have now fallen for the past seven months.

In December, first time buyers accounted for 31% of sales while individual investors were 17% of all sales. First time buyer levels are down slightly for the month and investors are a slightly larger share of the market.

In short, the market is showing some positive signs (sales levels, home values), but also negative signs (affordability rates, inventory levels). So what is in store for 2020?

Dr. Yun said buying conditions are actually favorable and will continue to be throughout the year. “We saw the year come to a close with the economy churning out 2.3 million jobs, mortgage rates below 4% and housing starts ramp up to 1.6 million on an annual basis,” he said.

“If these factors are sustained in 2020, we will see a notable pickup in home sales in 2020,” Dr. Yun concluded.

“NAR is expecting 2020 to be a great year for housing,” said NAR President Vince Malta, broker at Malta & Co., Inc., in San Francisco, California. “Our leadership team is hard at work to secure policies that will keep our housing market moving in the right direction, like promoting infrastructure reform, strengthening fair housing protections and ensuring mortgage capital remains available to responsible, mortgage-ready Americans.”

Mortgage Bankers Association SVP and Chief Economist, Dr. Mike Fratantoni observed, “We expect that home sales will rise in 2020, as additional new housing construction has come onto the market, and the job market remains strong and mortgage rates are low.”

“Typically, the inventory of homes on the market drops at the end of the year,” noted Dr. Fratantoni. “However, the supply of existing homes is now at a record low, and this will constrain the pace of sales this spring from being even stronger. However, the recent gains in new home construction is a positive, as the total inventory on the market will allow prospective buyers to find properties.

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Real Estate Big Data

What happens in a sellers market when people stop selling?

(REAL ESTATE BIG DATA) People are staying in their homes longer so median tenure is up, but there are plenty of areas of the country with lots of moving, so know your area.

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median tenure is up

When it comes to buying or selling a home, much of the focus naturally falls on people in the process of moving. Where they want to relocate to, how long it takes them to find a home…etc. But there’s another part of the equation: what happens once someone buys a home? More importantly, how long do they stay put?

In 2018, the National Association of Realtors® (NAR) actually did a study on this and found that the median amount of time individuals own their homes is 13 years. That’s actually a jump since the last decade, when people were more likely to stay for only about 10 years.

Of course, median scores don’t paint an accurate picture of what’s happening in specific locations. For instance, homeowners in the north eastern section of the United States (think states like New York, Massachusetts and Pennsylvania) are more likely to keep their homes for longer periods of time. On the other hand, homeowners in the west – think Utah, Arizona and Colorado, not the Pacific Northwest – are more likely to sell their homes within 8 years.

One good indicator of whether or not someone will keep their homes for longer is average home prices. In general, NAR found that people who lived in areas where housing was expensive, like California, were less likely to sell quickly. High prices also make selling homes difficult: people often don’t want to put their home up for sale when they don’t have anything lined up. This can create a housing shortage, which can drive prices higher, furthering the cycle.

That said, other areas are seeing massive growth: locations like Austin, Texas or Boise, Idaho, tend to have homeowners selling more often.

The good news about places with “low median tenure” (people moving more often) is that there’s more likely to be growth in the housing market. After all, if someone moves out of their starter home into something bigger, it leaves that starter home open for newcomers looking to settle down in the area.

Essentially, while home tenure has risen on a national scale, the diverse landscape of the United States means experience will vary depending on your specific location.

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Real Estate Big Data

Negative equity is falling, but we’re not out of the woods yet

(REAL ESTATE BIG DATA) The number of homeowners who are living “upside down” continues to decline year-over-year and within the last year, most have seen a 5.1% increase in equity

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Equity line graph

As real estate goes, 2009 is gone and “fingers crossed” it isn’t ever coming back. As data released Wednesday shows, the number of homeowners who are upside down, in negative equity, continues to decline.

CoreLogic, a provider of consumer, financial and property data, analytics and services to business and government, released the report on Dec. 12.

Being underwater, upside down decreased by 4% to 2 million homes or 3.7% of all mortgaged properties, according to the report, which was shared on the Calculated Risk blog. And, 78,000 properties, that were once negative, left the upside down behind and regained equity in the third quarter of 2019.

According to the report, the 64% of U.S. homeowners with mortgages have seen their equity increase 5.1% year-over-year – a gain of almost $457 billion since the third quarter of 2018.

Meanwhile, the number of mortgaged properties in negative equity declined 10% or roughly 220,000 homes in the third quarter of 2019, the report said. In comparison, during the same time period in 2018, 4.1% percent of homes or roughly 2.2 million were upside down.

“Ten years ago, during the depths of the Great Recession, more than 11 million homeowners had negative equity or 25% of mortgaged homes,” said Dr. Frank Nothaft, chief economist for CoreLogic. “After more than eight years of rising home prices and employment growth, underwater owners have been slashed to just 2 million, or less than 4% of mortgaged homes.”

Negative equity can occur for a number of reasons including a decline in the home value or an increase in mortgage debt or both.

CoreLogic began its equity data analysis in the third quarter of 2009. During the fourth quarter of 2009 negative equity peaked at 26% of mortgaged properties.

Even though the numbers of properties in negative equity has declined, there are still nearly 2% of homes with a loan-to-value 125% and higher, according to the report. Yet, year-over-year, the number of homeowners in the negative has declined from 2.2 million to 2 million, according to the report.

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