Big Data in the Real Estate Industry
Big Data in Real Estate continues to push the industry in many positive ways. Auction.com and Google are attempting to forecast the future, smart homes collect data, residential owners/buyers have more access to data than ever, governments provide easy access to documents, and investors sift through large amounts of data quickly. As with all opportunities in business, the time and funds invested have to be weighed against the rewards. Using data to gain a competitive advantage is not anything new, but some Big Data concepts are here to stay and others come and go.
Forecasting the future has always been an aspiration of real estate investors. Big Data has continually evolved to make this endeavour more accurate and backed by real statistics. Google has built an empire based on data and took a dive into real estate with their $50 million investment in Auction.com this past year. Together they have launched the “Auction.com Real Estate Nowcast” that aims to predict trends faster than anyone else in this industry. Using Google search engine data, they have come very close to predicting the future and have tested the information against market history. Waiting for sales trends to come out based on recent sales seems to be a thing of the past. Auction.com lauds says it in their own words, “…Nowcast is a new housing sales report that combines industry data, proprietary company data and Google search activity to predict market trends as they’re occurring, a full month before the traditional home sales reports come out.”
Not so fast
With all the good that comes with Big Data there are also a few pitfalls that users need to avoid. David Howell, executive vice president and chief information officer at McEnearney Associates has studied the practical application of the new Big Data systems and published an article in the Washington Post. “Out of almost 1,000 listings, we were off by one, while one of the national sites showed almost 28 percent too many properties and the other national site showed 30 percent too few. The first national site simply doesn’t update its data on a timely basis, and the other one has the same problem compounded by the fact that lots of sellers don’t want their homes on a site with inaccurate estimates of the market value.” Real Estate businesses and consumers alike have to know how to interpret the data they are reviewing to ensure that they are properly synthesizing. Businesses have to have monitors in place to make sure that data errors are minimized similar to a “For Sale” signing falling down an incorrectly categorized data point can have dire consequences. Mr. Howell also bridges the gap in displaying that, yes consumers are better informed than before and taking full advantage of the ease of access to data, but this has had a surprising effect on the reliance on people. “In 2001, 13 percent of home buyers identified the house they bought on the Internet – and today it’s approaching 80 percent. In the old days, folks relied on newspaper ads, yard signs, friends, neighbors and co-workers. In 2001, 69 percent of home buyers used an agent or broker — today, it’s 88 percent. That’s because it isn’t about controlling the search process — it is and always has been about providing value to the transaction.” These results are surprising in that the data has driven people to seek experts more than ever.
Application to buildings and homes
There are always challenges, but overall Big Data is transforming the way real estate is conducted. “Gut feelings” are still required, but more than ever they can be substantiated or denied with statistics… quickly. Commercial Buildings and now even homes have “smart systems” that are compiling data that is being used to make buildings more efficient. Adam Ozimek writes in Forbes about the Nest Smart Thermostat, “The Nest smart thermostat that Google recently acquired recently pays attention to where you are in your house and when and remembers this. It’s easy to imagine where this leads in the future: Robot vacuums will know the dimension of every room in the house, the kind of flooring in each, and maybe even the quality and age of the flooring; smart TVs will know which room is the living room; Nest knows which room is the kitchen, which are the bedrooms, and how energy efficient the home is. What’s more Nest will be able to measure the extent to which the house is fully utilized and therefore how convenient the layout is; in other words, a Walkscore for your home.”
Data has always been used, but now the scale of statistics has increased rapidly. Real Estate entrepreneurs who invest in the correct data at the right time will be rewarded and the same is true for those who make the wrong decisions. What is certain though is that those who don’t pursue usage of Big Data in some manor will be left behind.
Big Data is on the agenda of the MIPIM 2015 conferences. Check out the entire programme and learn more about the opportunities opening up.
Austin Dias works with investors, developers, tenants and landlords to reach their real estate objectives. He is currently enrolled in the University of San Diego Master of Real Estate program and he is an official curator and blogger for Global Real Estate.
Top image credit: ra2studio