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Data & Analytics

Artificial Intelligence

AI Enables Personalized Property Intelligence for Investors By Steve Gaenzler Historic inflation, a doubling of mortgage rates, and general uncertainty about the direction of the real estate market have made investors cautious about the future and concerned about risk in their portfolios. The U.S. housing market is experiencing something between a normalization and a correction. After skyrocketing in 2021 and early 2022, home price growth slowed significantly between June and September, according to homegenius Home Price Index (HPI) data released by homegenius Real Estate. But while the slowdown has been broad based, it has not been evenly distributed. Shifts in home prices vary significantly by market—with the West and Southwest seeing the biggest slowdowns in appreciation and San Francisco becoming the first major metro to register falling home prices. Geographic differences make accurate valuations a challenge at a pivotal moment when investors need maximum clarity. Fortunately, artificial intelligence (AI) can help solve the trickiest puzzles. Recent AI innovations in valuation technology now make it possible to generate highly personalized intelligence on properties and gain an analytical edge in fast-moving markets. Introducing Computer Vision Computer vision is a field of artificial intelligence that uses advanced machine learning to teach computers to interpret and understand the visual world. This technology has already been used for many things like autonomous vehicles, facial recognition, and medical image analysis. Computer vision is being applied to more and more use cases across different industries every day, including the real estate valuation process. By drawing on billions of digital images from cameras and videos and processing them through deep learning models, computers can be taught to accurately identify and classify the attributes and condition of a property and evaluate it against comparables in any geographic area. This type of AI attempts to mimic the abilities of an appraiser to see a property and assess its value, except AI can be faster, smarter, and may mitigate inherent human bias. Computer vision technology and AI-enabled pricing tools have a range of applications across the real estate ecosystem. For investors, it may help fine-tune investment strategies, increase return on investment (ROI) for portfolios, and make investment decisions based on personalized property intelligence:  These applications work together for real estate investors and may help to mitigate risk, increase accuracy, and speed up the analytical process. As the U.S. real estate market enters a period of uncertainty and turbulence, technologies that deliver personalized property intelligence at a macro and micro level will be increasingly valuable. Intelligent valuation solutions powered by AI image recognition and computer vision technology like homegeniusIQ from homegenius Real Estate are transforming the real estate industry and making it easier for investors to navigate the challenging market. It is all about getting the right data in hand at the right time so you have the ability to maximize the value of your portfolio and maintain a stable risk management posture. Whether deteriorating economic conditions in the near-term will be enough to overtake the underlying longer-term secular trends driving the run-up remains to be seen. But while they are waiting for a clear trend to emerge, now is a good time for investors to take stock of their portfolios and make decisions based on the most accurate analytics available.

Technology

Three Distinct Quarters Tell the Story of a Resilient Housing Market

Differences Between Pandemic and Great Recession By: Steve Gaenzler, SVP, Data & Analytics, Radian One year ago, it would have been nearly impossible for prognosticators looking ahead to fathom what was to beset the U.S. in 2020. A worldwide pandemic with terrible human loss, record low unemployment rates flipped to record highs in a matter of weeks, 30-day mortgage delinquency counts shooting to a level higher than the peak of the Great Recession, and equity markets that lost almost half of their value only to roar back to near pre-pandemic levels in less than six months. Like watching a professional tennis match, the ups and downs have been dizzying. And all the while, U.S. residential home prices have appreciated without pause as demand continued to outpace supply. We have been tracking the U.S. real estate markets using the Radian Home Price Index (HPI). Provided by Radian’s subsidiary Red Bell Real Estate, the Radian HPI measures changes in real estate markets more quickly and with more granularity than any other measure. It has provided evidence of three very distinct housing market quarters. The first three months of the year were strong for the housing market. Then as the pandemic took hold and lockdowns were implemented nationally, home sales activity was curtailed substantially.   From April through June the U.S. recorded much slower home price growth. But the third quarter of 2020 showed evidence of a dramatic recovery and a clear return to the faster price appreciation rates reported at the end of 2019. Amazingly, with all the financial challenges this year, home sales activity will end 2020 as the highest year ever recorded, and home prices will have continued to climb.   This was made possible through the confluence of events new and old. For those dealing with loss of job or income, the mortgage forbearance and eviction moratorium programs that were quickly put in place have kept people in their homes—a critical difference from the last financial crisis.  Direct payments to small businesses and consumers distributed aid more quickly and to those in need without an intermediary, also a change from the Great Recession.   But longstanding supply shortages and an increase in demand for low density (i.e., suburban) single family homes were met with historical lows in mortgage rates. In the first three quarters of the year, the Radian HPI has risen at an annualized rate of 7.4 percent, which was higher than the increase of 6.4 percent recorded during the first nine months of 2019. During the third quarter, national home prices increased at an annualized 8.9 percent, which outpaced the 6.8 percent annualized gains during the second quarter, when home price gains were positive, but more subdued. In fact, construction and supply shortages were made worse all over the country by pandemic related demographic changes. For example, with so many children moving back home with their parents, the supply of newly empty-nester homes typically added to the market has shrunk considerably. Over the past decade, on average the supply of homes on the market in the summer is about 25 percent higher than the winter lows of supply. This year, however, the summer market was only 8 percent higher, meaning more than 165,000 homes that would have typically been for sale, were not.    So, what can we expect for the balance of the year? The Radian HPI should offer a few clues soon. Unlike legacy indices that offer a picture with considerable time lag, the Radian HPI produces results just 15-days after months-end, making it the most responsive measure of changing patterns. And the Radian HPI is also more granular. Micro-market indices provide a view on markets all the way to the zip code or neighborhood. When overlaid with property attributes such as bedrooms or square footage within a micro market, the Radian HPI provides an even better look at trends that might tell us what is happening on the ground.

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