Connect with us

Real Estate Big Data

Real estate myths created during the pandemic

(REAL ESTATE BIG DATA) Real estate is a finicky field, but the most popular myths surrounding the effects of COVID-19 on the market are purely unfounded.

Published

on

real estate myths

In the past six months, there has undoubtedly been a large amount of misinformation regarding the Coronavirus, its treatment, and the long-term ramifications of a pandemic–a phenomenon that has affected, among other industries, real estate. Courtesy of SFGate, here are a few myths you’re likely to experience in the current market.

The first mythand, arguably, the most prevalent oneasserts that selling your home amidst COVID-19 restrictions is a poor choice. In fact, the opposite is true: Danielle Hale, a real estate expert, explains that people have been able to sell at relatively high rates despite the pandemic. “As long as buyer demand remains strong, I expect the market to remain tipped in favor of sellers,” she adds.

Of course, both taking the proper precautions during showings and maintaining social distancing–along with affording buyers an appropriate amount of grace when settling on a closing date–are important attributes of making a successful sale during this time.

Another myth you’ll probably hear about is tangentially connected to the first–that home prices are declining, thus making it, again, a bad time to sell. This is simply untrue; Lawrence Yun of the NAR points to low mortgage rates, as well as a general lack of people selling during this time, as the culprit. It makes sense that people would want to protect their investments for the time being, after all.

Thirdly, and lastly in the buying-and-selling myth pantheon, you’ll find that people are actually buying houses more now than they were before the pandemica direct answer to the myth that buyers are hesitant to close on properties for now. Just like the last item, you can look to low interest rates and high demand as the justification here.

Then, there is the myth that you can no longer tour homes in person seems real enough, and it may be standard practice for some sellers; however, the majority of homes being sold in the United States, as of now, are viewable in personand, more importantly, with the viewer’s safety at the forefront of the seller’s endeavors. However, SFGate does point out that, due to rising cases in much of the United States, some of these restrictions may eventually return.

Finally, the myth that buyers are actively attempting to leave cities in favor of suburb living seems to be circulating as of late. SFGate acknowledges that this myth is “partly true”, but that doesn’t mean city listings aren’t availablenor does it mean city dwellings will begin to lose their value. After all, urban living has consisted of largely prime real estate for as long as any of us can remember, and the Coronavirus probably won’t outlast that allure.

The bottom line is this: Real estate, like everything else, has been affected by COVID-19but it hasn’t been completely turned on its head and wiped out like some may think.

Jack Lloyd has a BA in Creative Writing from Forest Grove's Pacific University; he spends his writing days using his degree to pursue semicolons, freelance writing and editing, oxford commas, and enough coffee to kill a bear. His infatuation with rain is matched only by his dry sense of humor.

Real Estate Big Data

NAR Report: The connection between home owners and financing

(REAL ESTATE BIG DATA) Financing a home purchase or an existing home is an exciting step. This NAR report gives us insight into what may be inhibiting home buyers.

Published

on

The yearning to own your own home has been and still is something people really want. According to the most recent Profile of Home Buyers and Sellers report by The National Association of Realtors® (NAR), data shows first-time and repeat buyers are still financing homes. The survey, which “allows industry professionals to gain insight into detailed buying and selling behavior” since 1989, surveyed buyers and sellers who purchased between July 2019 to June 2020.

How much do home buyers finance?

The NAR report shows 87% of all home buyers financed their home in 2020. This is up 1% from last year. First-time buyers are more likely to finance their homes more than repeat buyers with 95% and 83%, respectively.

Buyers who financed their home purchase, by adult composition of household

Also, 14% of all home buyers financed 100% of the entire cost of their home using a mortgage. First-time buyers’ median percent of finance was 93%, and it was 84% for repeat buyers. Overall, the median percent of finance for all buyers was 88%.

Percent of Home Financed by First-Time and Repeat Buyers, and Buyers of New and Previously Owned Homes

Does everyone put 20% down?

According to the NAR report, the median down payment for all home buyers was 12%. Among first-time buyers, it was 7%, it was 16% for repeat buyers. For the most part, down payments have either gone down or stayed about the same since 2005.

Median Percent Downpayment of First-Time and Repeat Buyers, 1989-2020

Over half (58%) of recent home buyers said they used their savings for financing their home purchase. This is a 2% decrease from last year but is still higher than the historical norm of 55% since 2000. Also, 38% of homeowners said they used proceeds from the sale of a primary residence to finance their new home, the same as last year.

For repeat buyers, 54% cited using proceeds from their previous sale to finance their new home. In 2014, it was 47%, and 25% in 2012. The high increase could be due to the increase in property values over time. On the other hand, 79% of first-time buyers used savings, and 22% used a gift from family or a friend to finance their home.

Sources of Downpayment, first-time and repeat buyers

Home Buying Obstacles

For 24% of home buyers, some sort of debt was cited as a reason for having to delay purchasing a home. Home buyers waited a median of 3 years to save for a down payment and lower debt before buying a home.

Years Debt Delayed Home Buyers from Saving for Downpayment or Buying a Home

For home buyers, 11% said saving for a down payment was the most difficult step in the home buying process, down 2% from last year. Expenses that made it difficult to save were student loans (47%), high rent or current mortgage payment (43%), and credit card debt (36%). To make a purchase, some home buyers made financial sacrifices like reducing spending on luxury or non-essential items (23%) and cutting entertainment spending (15%).

Expenses that delayed saving for a downpayment or saving for a home purchase, by adult composition of household

Is purchasing a home a good financial investment?

According to the NAR report, 83% of home buyers did view buying a home as a good investment, and 42% said it was even better than owning stock. Also, 85% of first-time buyers see it as a good financial decision compared to 82% of repeat buyers. For unmarried couples, it was 86%.

Buyers' View of Homes as a Financial Investment, first-time and repeat buyers, and buyers of new and previously owned homes

Overall, the NAR report shows first-time and repeat buyers are still financing to purchase a home. Repeat buyers tend to put more money down on a house using money from a previous home sale. First-time buyers tend to put less money down and use their savings. And, debt is without a doubt, the reason why most buyers delay purchasing a home.

Continue Reading

Real Estate Big Data

5 major ways AI is shifting the real estate scene and how to utilize 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!

Published

on

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.

Continue Reading

Real Estate Big Data

As remote work explodes, workers flock to second cities

(BIG DATA) As remote working becomes more normalized, workers are choosing where they want to live, so second cities are changing the landscape.

Published

on

Fall leaves on a white and red house, living in second cities

Over the summer I had to move out of the SF Bay, my home and a famously high-rent hotspot. Life there had never been cheap, but the economic crash at the start of the year had made it nearly impossible to stay. (Not to mention the yearly wildfires were pretty inconvenient.)

It’s strange to admit, but going to a suburb on the other side of the country was easier than trying to continue living in my home city.

I’m not alone in feeling that way. Plenty of other workers in the digital sector are making the same choice, leading to the emergence of ”second cities” where predominantly white-collar workers have been moving to comfortably work from home.

Remote work has evolved from a once-privileged exception to practically being a hot business trend, and the merits have been widely embraced across industries where remote work is possible. In a study performed by UK employment firm Robert Walters, 86% of employers across 31 countries replied that they intend to keep their remote workforce in some capacity. In other words, the second city is here to stay.

Economics lecturer Michel Serafinelli suggested to The Guardian that cities will become less congested, high costs of living will begin to balance out, and skilled workers will be more widely distributed as a result of this transition.

Minnesota is one state that’s counting on these “second cities” to continue flourishing. By investing high speed broadband infrastructure, it hopes to attract wayward telecommuters to come live there and boost GDP.

So the flight from metropolis seems bound to continue, at least among certain workers. Based on 2018 statistics from the US Bureau of Labour, Black and Hispanic men in particular disproportionately work in the service sector, where just 1% of jobs can be performed remotely.

2020 has marked a major turning point for the US housing economy. In areas like New York, Seattle, San Francisco, and Los Angeles, residents have protested unaffordable rent for decades. Yet gentrification has slowly but relentlessly escalated, driving costs-of-living sky high and displacing long-term local residents. California has actually been slowly losing residents to this process over the last four years, saying goodbye to just under 200,000 in 2018 alone according to MSNBC.

Bloomberg City Lab breaks it down like this: “From the Bay Area and Los Angeles, Phoenix and Las Vegas are typically the most popular destinations. And New Yorkers showed a tendency to move to Florida — a state that had 22,000 more users looking to move there in the third quarter than leave.”

The effect is so dramatic, it may have had an impact on this year’s election results.

In other words, these second cities aren’t exactly new. And if this year is any indication, they are only going to grow in influence in the future.

Continue Reading
Advertisement

Our Partners

Get The Daily Intel
in your inbox

Subscribe and get news and EXCLUSIVE content to your email inbox!

Still Trending

Get The American Genius
in your inbox

subscribe and get news and exclusive content to your email inbox