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NAR Report: Comparing changes in home buying during COVID-19

(REAL ESTATE BIG DATA) COVID-19 is changing the landscaping of home buying in the U.S. NAR’s new report shows some signs of where it’s headed.

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The COVID-19 pandemic has changed pretty much everything for everyone in the U.S., and home buying is no exception.

To see how, the National Association of Realtors added a section to their “2020 Profile of Home Buyers and Sellers” that looks at how the data is shifting. NAR pulled out data on primary home buyers who closed from July, 2019, through March, 2020, compared with those who closed from April through June, 2020. That means the pandemic dataset is based on just 3 months – likely not long enough to call something a major trend but long enough to get an idea of where things are likely to go.

The big picture:

  • Pandemic-era buyers are likely to make more money and pay more for homes. The biggest jump was in the $500,000+ price range.
  • More people want to live with more people. They’re choosing properties suitable for multiple generations, and more unmarried couples as well as unrelated people are buying together.
  • Buyers are spending less time searching before talking to an agent.
  • Having trust in and personal connections with an agent are becoming more important for buyers when choosing someone to work with.
  • 14% of buyers said COVID-19 created some kind of roadblock that impacted the transaction.

To dive a little deeper, here are some of the main takeaways based on the biggest swings in data.

Who’s buying what?

Demographics and household makeup are reshaping demand. Although married couples remain at around 60% of buyers, the next largest group – families with children under 18 – is up by 2 points, as are unmarried couples. Single women, previously the third largest group, have dropped 4 points.

But the big story here is increasing demand for multi-generation homes. Buyers who say they wanted room for taking care of or just spending time with older parents and relatives are up a combined 7 points. (Hello, sandwich generation!)

Multi-Generational Home Purchased Chart (before and after COVID-19)

Unmarried couples and roommates who want to share costs are also trending upwards.

FYI to young adults who plan to move back home: Your parents might not buy a house with room for you and your collection of soccer trophies. “Children/relatives over 18 moving back into the house” as a reason for buying dropped 7 points.

Unsurprisingly, people who make more money are buying more houses; people who make less are buying fewer houses – undoubtedly related to the pandemic’s economic impact. Household median income for pre-pandemic buyers was $94,400 compared to $110,800 from April on.

Household Income of Home Buyers before and during COVID-19

More people are taking the opportunity to move from rentals into buying a home – up a whopping 9 points.

People who identify as White/Caucasian and those born in the U.S. remain the vast majority of buyers; however, Asian/Pacific Islanders are up by 4 points and Hispanic/Latino people are up by 2.

Where are they buying?

Suburbs are hot. Urban areas are still in. Small towns are out.

Specifically, suburbs/subdivisions are up 7 points. Urban areas/central cities are up 2. Small towns are down 7, with a 2-point drop off for rural areas.

We’ve been reading for months now that pandemic-era buyers, especially those who can work remotely, are fleeing cities for suburbs and small, rural towns in the quest for more space, lower costs, and fewer people. NAR’s numbers bear that out for suburbs, but not for small towns and rural areas.

Location of Home Purchased, before and during COVID-19

How much are they paying?

Median price is up significantly, going from $270,000 to $339,400. The pandemic doesn’t appear to have slowed sales, especially in hot markets with tight inventory. People are paying more to get what they want, but prices are rising as demand exceeds inventory.

Prices start to move up in the $350,000 to $399,999 range, with a 3 point jump. The $400,000 to $499,999 range is up by 4 points. It’s the $500,000+ homes that are really taking off, with a 9 point jump to 23% of buyers. High demand and tight inventory were already driving prices upward, but the pandemic is pushing them even higher, as the median price went from $270,000 to $339,400.

Homes from the $199,999 to less than $100,000 range all saw a downturn.

Price of Home Purchased before and during COVID-19

What’s the search like?

Buyers are spending less time in the home buying process searching before getting an agent – now 2 weeks instead of 3 – and typically seeing 8 rather than 9 homes. Most people are still seeing 5 to 10 homes.

What are buyers looking for in an agent?

Trust and personal connections are becoming more important to buyers. The category of “Agent is friend or family member” is up 5 points; “Agent is honest and trustworthy” climbed by 3.
Experience and reputation were rated as slightly less important for home buying.

Most Important Factors when choosing an agent before and during COVID-19

What’s up with lending?

Fixed-rate mortgages continue to reign supreme, but more people are holding on to their cash. Buyers who had no mortgage dropped 5 points. The number of people going for conventional loans headed up by 4 points. There were slight upticks in fixed-adjustable or adjustable rates.

Median percentage financed stayed the same at 88% throughout the 12 months, with the largest group of 80% to 89% financed seeing a slight drop. Most movement was in the 70% to 79% range, which went up by 5. So buyers are putting down more cash, but fewer people are putting down all cash.

Getting a mortgage appears to be getting harder, but the numbers aren’t clear on why. Looking at reasons for denials, low credit scores dropped 18 points and unverifiable income dropped by 8 points. But the category of “other” climbed 21 points, leading to the question of whether some new, pandemic-related reasons have popped up.

Mortgage Application had been rejected from mortgage lender, before and during COVID-19

It will be interesting to see whether these nascent trends continue into 2021, but it will always be important for real estate pros to keep on top of trends. Knowing where things are going can help agents refine marketing strategies, identify potential niches and, most importantly, make sure they’re giving clients the best possible service.

Lisa Wyatt Roe is an Austin writer and editor whose work has been featured on CNN.com/Travel, in Texas Parks & Wildlife Magazine and in the book “Seduced by Sound: Austin; 100 Musicians on Why They Make Music.” Travel and live music feed her soul. Volunteering with refugees feeds her sense of purpose. And making friends laugh feeds her deep (yet possibly sad) need to get all the laughing emojis on Facebook.

Real Estate Big Data

Shadowmap shows where the sun and shadows are at any property, any time

(TECHNOLOGY) It seems like such a small detail, but for a client desperate to know where the sun and shadows are for energy efficiency, gardening, or what have you, Shadowmap is your tool for an immediate answer.

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For something that we all experience daily, sunlight can feel oddly personal – especially if you don’t feel like you’re receiving enough of it at the right time in your house. If you’ve been in the market for new data or a tool to help draw in real estate clients – or just appeal to your current ones – Shadowmap may be your saving grace.

Shadowmap, a tool from creators George Molzer and Simon Mulser, is a deceptively simple product with some really cool applications: It allows you to map out solar shadows in any environment using “3D data in a worldwide interactive maps app.”

The base program itself is free for online use, and it’s extremely easy to use. Simply typing in an address will take you to the property in question, at which point you can drag a slider to simulate the passage of time throughout the day.

Shadowmap’s “Pro” subscription comes at around $10 per month (or $100 per year) and allows you to select specific dates (both past and future) as well as view high-definition visuals; you’ll also receive updates as they come.

Adding this to your toolbox could help convince clients who are on the fence about purchasing certain properties, and it makes for a powerful discussion piece when taking on new clients.

Being able to tell someone exactly how the sun will illuminate certain sides of their property after only a few seconds of research is impressive, and it entails information that many consumers will want to hear whether or not it is at the forefront of their minds.

There are plenty of applications for developers and casual designers, too. Product Hunt cites several different users proclaiming their joy at the creation of Shadowbox, from people who are excited at the idea of Feng Sui to relieved developers positing that the tool will make compliance easier to achieve.

Employees who work in the elements are similarly intrigued: “As I work with Wine Imports the use-case for weather-sensitive products such as Rosé are clear,” says Andreas Bøggild.

Of course, the technology is only as accurate as past weather conditions can dictate, but Shadowmap is a welcome alternative to standing in the garden and looking up at the sky for hours to see when the sun will finally hit the living room window.

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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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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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