How Big Data Has Impacted The Real Estate Industry
Big data has impacted the real estate industry in major ways. Here's what to know about the major transformations it has caused.
Big data has made its way into virtually every industry. The real estate profession is no exception. Real estate professionals all over the world are benefiting from big data in a number of ways. CIO has published a very introspective article on eight companies that are using big data to disrupt the real estate industry. Here are some of the biggest benefits of big data for real estate.
Better Prediction and Analysis
Big data improves the accuracy of predictions and analysis in real estate. Data allows real estate professionals to spot trends and better predict when those trends may reoccur. They can also anticipate the effects of these trends, which allows them to be better prepared if they reemerge. We can also better analyze the state of the market and the mortgage industry. For example, we know that in 1980, median household incomes could only afford to spend three-quarters of the median housing cost. In 2016, household incomes rose enough for families to buy a home that was 1.5 times the median home price. Data is helping the industry provide better analysis and predictions. They will be even better at this in the future, as big data algorithms improve further.
Accurate Property Evaluations
Realtors all over the country have started embracing automation to streamline their valuation and customer engagement models. The error rate for real estate professionals using AI algorithms is just 9%. Traditional appraisals rely largely on previous appraisals or selling prices of nearby properties. But they almost invariably ignore amenities and improvements that may have added value to a home. New models use the latest geographic, economic and demographic data to minimize the risk of mistakes when analyzing properties.
Helping Buyers and Sellers Adjust their Behavior to Align with the Market
Big data ensures that anybody buying or selling a property will be well-informed, which makes the entire process smoother and easier. Companies like Redfin, Zillow, and Trulia compile and collect data (such as selling trends, traffic data and demographic information) that both buyers and sellers can use to make better decisions. Builders can use big data to better understand the environment and local community. This helps them plan properties that reduce negative sociological impact, improve the health of residents and support energy efficiency projects.
Aid Consumers with Home Prospecting
In the future, Geographic Information Systems will play a very important role in the future of real estate prospecting. It will use geo-data to connect with customers. The system will have real-time data, which consumers can use to make more informed decisions. As it is, companies are already offering historical, which allow them to see:
- The history of the prior occupants
- The history of improvements made to the property
- The average prices of similar homes in the area
The third point is one of the most important. It helps buyers make sure that they are not getting exploited by a seller that has too steep of an asking price.
The Decline of Real Estate Agents
We saw a decline in real estate agents after the financial crisis of 2008, but the crisis wasn’t the only factor that drove agents to leave the business. It’s now easier than ever for home buyers to find and view properties. Google has also made it easier for buyers to learn about the home-buying process. According to the National Association of Realtors, 51% of home buyers found their ideal home online in 2017. Buyers can now find all of the data they need on crime, proximity to amenities, traffic, air quality and more. All of this information is easily accessible – without the help of a real estate agent.
Big Data is Solving Countless Challenges in the Real Estate Industry
The real estate industry has undergone a massive crisis in recent years. The 2008 financial downturn forced many real estate professionals to rethink their business models. The good news is that big data is helping them formulate more effective strategies. They can reduce their operating costs and improve their marketing strategies. Home buyers and sellers are also turning to big data to improve their own outlooks. This can have a huge impact on the future of markets all over the country.