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Real Estate Big Data

How a COVID-19 vaccine could upend the housing market (again)

(REAL ESTATE BIG DATA) COVID-19 completely changed the trajectory of the housing market, but the promise of a vaccine could pull it back around in another direction.

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A house at dusk with lights illuminated, favored by housing market.

According to CNN Business, “the coronavirus pandemic dramatically changed the landscape of the housing market.” In many expensive urban housing markets, such as Manhattan and San Francisco, vacancy rates are high as people are moving to the suburbs; rents are low in these markets because workers are free from their office jobs.

When combined with low interest rates, this is putting a higher demand on homes in less populated markets. Many people are watching the real estate market closely as vaccines on the horizon promise a return to normal. How could the housing market be affected?

Homeowners still want to work from home to enjoy their sanctuary

The coronavirus reminded people how important home life was. Working from home eliminated commutes and gave workers back some of their time. Even with all the complications of working from home, buyers are looking for homes with a big backyard and space for a home office.

In the Dallas market, starter homes are high in demand. In urban markets that are more expensive, second homes in the rural areas are popular.

People should return to urban areas

As the vaccine gives Americans a return to normal, people will return to the big cities. CNN Business reports that the vacancy rate in Manhattan is 6.14%. Median rental prices are down almost 15% over last year.

As the pandemic comes to an end, it may be a renter’s market until the Fortune 500 companies bring people back to work. A vaccine could also lead to non-US buyers returning to the market, which would make the market more stable.

The vaccine could reverse mortgage rates

Some economists believe that the interest rates will continue to decline, but others suggest that a vaccine could switch the trend. Even so, Marketwatch predicts that many homeowners will still refinance as rates go. Homes will still be in demand, leading to a surge in the housing market.

In fact, a vaccine could mean that more homes will go on the market. Homeowners who hunkered down to ride out the pandemic could be more willing to host open houses and make a move themselves. A vaccine could contribute to supply, which will help buyers get better deals.

The Austin market is strong

Residential sales in the Austin area have increased by 31.5% over last year. Prices have also surged. The median price of a home in Austin’s city limits was $435,000 in August. Sales are expected to slow as supply dwindles. Inventory is limited because people are choosing to stay in their homes. Competition for homes on the market is high, driving prices even higher.

A vaccine is promising for the real estate market

A vaccine should even out the market, but without a crystal ball, it’s hard to know what will happen. Record sales in the Texas market certainly weren’t predicted to be an outcome of a pandemic. It will take time for the economy to level out and for people to get back to work in the entertainment and restaurant industry. How the vaccine impacts the market may depend on location, just as it always has.

Dawn Brotherton is a Staff Writer at The American Genius, and has an MFA in Creative Writing from the University of Central Oklahoma. Before earning her degree, she spent over 20 years homeschooling her two daughters, who are now out changing the world. She lives in Oklahoma and loves to golf. She hopes to publish a novel in the future.

Real Estate Big Data

After four months of decreasing home sales, there’s a 1.4% blip upwards

(REAL ESTATE) With massive annual gains and slight monthly gains, existing home sales rise 1.4% in June, but the market remains plagued by tight inventory levels.

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home sales

Between May and June, existing home sales (contracts signed) rose 1.4%, after fourth consecutive months of declines and a 22.9% increase from June 2020, per the National Association of Realtors (NAR). The average days on market nationally was only 17 days.

After months (years) of restricted inventory levels, and an entire sector holding their breath for any relief, inventory levels rose 3.3% in June. The market remains blue in the face while holding said breath, but even this slight improvement is a sign of hope.

Meanwhile, the median home price hit $363,300, rising 23.4% over the year, the second highest increase on record since January 1999. All-cash transactions are increasingly common as folks increase their wealth by cashing out of the stock market and/or their housing equity, continuing to nudge out many first-time buyers who rely on traditional mortgage options (despite interest rates remaining historically low).

NAR’s Chief Economist, Dr. Lawrence Yun said, “Supply has modestly improved in recent months due to more housing starts and existing homeowners listing their homes, all of which has resulted in an uptick in sales. Home sales continue to run at a pace above the rate seen before the pandemic.”

Dr. Yun noted that home prices won’t decline with still-tight inventory conditions, but expects price appreciation to slow by year’s end. “Ideally, the costs for a home would rise roughly in line with income growth, which is likely to happen in 2022 as more listings and new construction become available.”

Existing home sales in the Northeast rose 2.8% in June, 3.1% in the Midwest, 1.7% in the West, and remain unchanged in the South.

So what’s next for the housing sector with rising prices and restrictive inventory levels?

“NAR continues our conversations with policymakers and leaders from across the industry in an effort to boost housing inventory and increase access to safe, affordable housing for all Americans,” said NAR President Charlie Oppler. “As the nation’s economy continues to recover from COVID-19, securing policies that are in the best interest of U.S. consumers and homeowners remains NAR’s priority.”

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Real Estate Big Data

5 ways AI is shifting real estate and how to capitalize on it

(REAL ESTATE BIG DATA) Artificial intelligence is bringing a seismic shift to commercial real estate in everything from investing to sales to property management. Hold on!

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Woman working at desk with multiple desktops open to AI tools.

Forget about that location thing. Now real estate – especially commercial real estate – is about data, data, data. As in, Really. Big. Data. And AI is owed a large part of the credit for that.

A dizzying amount of data is being crunched and sorted and searched by artificial intelligence-enabled tools that are changing how deals get done and who will still have a job in the future.

The promise of AI to use data to predict the future is massive – and it promises to do that with more accuracy and efficiency, greater productivity, and less cost for commercial as well as residential real estate.

So, what, exactly, can AI do for commercial real estate? Let’s break it down.

What AI is

To put it simply, artificial intelligence is what lets Amazon’s Alexa talk to you and cars drive themselves. Its algorithms use data to mimic human intelligence, including learning and reasoning. Then there’s machine learning, where algorithms analyze enormous amounts of data to make predictions and assist with decision making. We’re putting them both under the same AI umbrella.

There are four main areas where AI is remaking the commercial real estate industry: development and investing; sales and leasing; marketing; and property management.

Development and investing

With its ability to quickly analyze a staggering amount of data, AI lets investors and developers make better data-driven decisions. More responsive financial modeling helps identify ideal use cases and project ROI under multiple scenarios using real-time data. Pulling in alternative data – say, environmental changes or infrastructure improvements – goes beyond traditional data points and can identify investment opportunities, such as neighborhoods beginning to gentrify. In fact, alternative, hyper-local data has become even more important as COVID-19 continues to upend property valuation models.

AI’s crystal ball comes from recognizing patterns in the data and continuing to learn from new information. It can forecast risk, market fluctuations, property values, demographic trends, occupancy rates and other considerations that can make or break a deal.

And it does all of this more efficiently, more accurately and less expensively than manual methods.

Sales and leasing

There’s a big question looming over AI and automation: Will technology put real estate brokers out of business? The short answer is, “No, but brokers need to step up their tech game.”

Keeping up with – and being open to – tech trends is essential. Clients’ ability to use online marketplaces to search for or list property will only grow, but there still is no substitute for expertise and the personal rapport that builds trust. Chatbots can’t negotiate (yet). Robots can’t show a space and weave details about the property into a story. (If you want to know more about using storytelling in real estate, check out this great marketing guide.)

But Big Data is such a powerful tool that brokers need to know how to harness it for themselves. Having more, and more nuanced, data about clients and properties means brokers can better match the two. They can be more confident in setting sales prices and rental rates. Becoming a “technology strategist” to help clients design an automation strategy for a property would be a great value add to their services. Even just starting out with a website chatbot to answer common questions would add a level of tech-savvy efficiency to communication with clients and prospects.

Marketing

Also a boon of Big Data for brokers: more sophisticated, targeted marketing for themselves, as well as for client properties.

Integrating AI with customer relationship management (CRM) tools brings a richer understanding of clients and prospects that can make choosing marketing channels and personalizing targeted content more precise.

Then there’s data-driven lead scoring. Property intelligence firm Reonomy says its commercial data mine – 52 million properties, 100 million companies, 30 million personal profiles, and 53 million tenants – can be searched in multiple ways to create custom prospect lists. (Check out Forbes.com’s “5 Ways Artificial Intelligence is Transforming CRMs” for a fascinating list of what AI can do, including analyzing conversations for sentiment analysis.)

Property and facility management

The Internet of Things (IoT) is already helping property and facilities managers control and predict energy costs, as well as proactively address maintenance issues. Integrating smart technology like thermostats and sensors with AI also means more efficient space planning. Smart security cameras and wi-fi tracking can create “people heat maps” that can identify underutilized or overcrowded areas.

IBM’s TRIRIGA does that and more. Part of the Watson project, TRIRIGA offers AI-driven insights to show how people are actually using a space and ensure a company has the right amount of space in the right areas. It can also analyze common questions from a chat log, then use that data to create an AI virtual assistant to automatically answer those questions – and update itself as it learns new data. Maintenance requests, room reservations and more can be fully automated.

Strategic space planning has become even more important during the pandemic, as work-from-home trends and safety concerns reshape offices as workers return. (Need ideas for your office? IBM’s Returning to the Workplace guide might be a good place to start.)

Barriers to adoption

There’s no question tech-enabled commercial real estate companies will have a competitive edge. The question is, when will more of them agree enough to adopt AI more widely?

PropTech with and without AI has exploded over the past few years – and that’s part of the problem. In an Altus Group survey, 89% of CRE executives said the PropTech space needs significant consolidation before it can effectively deliver on industry needs; 43% said that is already underway or will occur within 12 months.

Then there’s the undeniable learning curve that comes with any tech tool – an investment of time as well as money. The survey also showed concerns about regulatory requirements for data collection and management, having enough internal capacity, and nonstandard data formats.

Despite those perceived barriers, there’s also no question that innovation and disruption from AI are moving at a dizzying pace – and that commercial real estate needs to keep pace.

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Real Estate Big Data

Home sales slip for fourth consecutive month, yet spike annually

(REAL ESTATE) While murmurs of a housing bubble permeate the market, home sales slide and inventory levels remain wildly restrictive.

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Home sales: House sellers prepping home with For Sale sign out front

Despite bidding wars in many areas of America, existing home sales dipped 0.9% from April to May, according to the National Association of Realtors (NAR), marking the fourth month in a row of small declines. Meanwhile, amidst fears of a housing bubble, all regions saw double digital annual gains.

Sales are “approaching pre-pandemic activity,” said NAR’s Chief Economist, Dr. Lawrence Yun. “Lack of inventory continues to be the overwhelming factor holding back home sales, but falling affordability is simply squeezing some first-time buyers out of the market.”

“The market’s outlook, however, is encouraging,” Yun continued. “Supply is expected to improve, which will give buyers more options and help tamp down record-high asking prices for existing homes.”

MBA AVP of Economic and Industry Forecasting, Joel Kan also sees a silver lining. He said, “One positive development was the 7 percent increase in for-sale inventory, which should slightly help price conditions.”

The median home price in May rose 23.6% over the year to $350,300, a record high and the 111th consecutive month of year-over-year gains.

The average days on market was unchanged for the month, remaining at 17 days, down from 26 days in May 2020. Fully 89% of homes sold in the month were on the market for less than 30 days.

Dr. Yun expects the 30-year fixed rate mortgage to remain below 3.5% in 2021, with a rate of 2.96% in May, down from 3.06% in April, according to Freddie Mac.

In the Northeast, sales fell 1.4% in May, but skyrocketed 46.9% from May 2020. The median price rose 17.1% annually to $384,300.

The Midwest experienced a 1.6% uptick for the month, and 27.2% for the year. The median price rose 18.1% for the year to $268,500.

In the South, sales slid 0.4%, up a whopping 47.2% from May 2020. Here, the median price rose 22.6% to $299,400.

Finally, home sales in the West declined 4.1% for the month, but saw a 61.6% increase from the previous May. Sale prices rose 24.3% over the year to $505,600.

NAR recently called on lawmakers to take “immediate” and “once-in-a-generation” action regarding the current housing supply crisis, so we’ll be watching for how the market is impacted in coming months.

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