How Data is Reshaping the Real Estate Industry
Data Provides Greater Insight and Potential for Success for Industry Professionals
By Erica LaCentra
Companies in the real estate industry today are in a unique position where there is truly greater access to data than ever before. Long gone are the days of making decisions based only on anecdotal evidence, historical trends, and experience within the industry.
Having the ability to pull accurate data in real time is empowering those in the industry to get a clearer understanding of where opportunities exist and how to capitalize on those areas of opportunity. So how is data best being leveraged in real estate and how is it being utilized to reshape the industry as a whole?
Improved Property Evaluations
Whether you are an investor looking to purchase a property, an individual selling a property, an agent trying to list a property, a developer looking to build, or a lender looking to finance a property, having an accurate property valuation is critical to your success. Traditionally, industry professionals rely on their expertise or the expertise and experience of others to manually appraise a property. Utilization of comparative market analyses certainly has its place, however, think how helpful it would be to be able to incorporate other data points into this process to price a property.
Being able to factor in additional information such as current and historical market trends, supply and demand levels in an area, fluctuating costs of materials for flippers and builders, and property features provide the ability to more accurately price a home whether it be today or looking into the future. In cases where comparable properties may be unavailable or in rare supply, think luxury properties or properties in rural areas, there can be a greater level of confidence in pricing a home utilizing these data points.
Better Risk Mitigation
Understanding and analyzing risk in the real estate industry is critical not only to buyers and investors but also to real estate lenders, property owners, and business owners. Having increased access to property data allows real estate professionals to make faster decisions with greater confidence to reduce potential losses.
Data can help provide potential homebuyers with greater insight into the area a property is in, such as crime rate trends, projections of property values, and much more that will allow them to understand how their asset might appreciate over time, if at all.
For investors, having better data can help them determine the best use of a property. Would a property be a better investment if renovated and sold quickly or is there greater potential for it as a rental property? Being able to analyze market supply and demand, market demographics, rent growth history and projections, home appreciation, and more can create a clear picture of how an investor can get the greatest return on their investment and feel secure in that decision.
In the same token, having access to this data can give lenders a greater level of confidence in any of the transactions they are financing. Similarly, having data points about the future use and potential performance of a property can allow lenders to make more calculated decisions about the terms they are offering to ensure they are secure in their position on the transaction, as is their borrower.
Utilizing data can help reduce rates of default and help mitigate potential risk because those items have been factored into the decision of whether to lend and what terms to lend at.
Enhanced Marketing
One of the biggest uses of data currently in the real estate industry is in marketing because professionals can develop a more targeted strategy. Agents and investors are now utilizing data to determine not only how to best market a property but to whom. Being able to identify buyer and renter demographics in various markets ensures that a property is being marketed to the right audience and the appropriate aspects of the property are being highlighted. Having the ability to properly target the right end-buyer or renter so that the property does not sit on the market too long is critical.
Also, by looking at market trends and data analytics, real estate companies can start to better predict consumer behaviors, such as when somebody may be ready to buy or sell a property or move, and what areas of the market are going to have increased interest. This allows companies to get in front of potential customers at just the right time to capture those transactions rather than coming in too early or too late and fighting with the competition. Utilizing data allows companies to proactively market in the real estate industry rather than market reactively as the market shifts.
Better Forecasting and Understanding of Market Trends
The real estate market is cyclical in nature, but it can often be challenging to forecast and predict the future of the space simply by looking at historical data. Having access to data in real-time is a game-changer for not only predicting the future of the industry but also understanding why certain trends may be occurring and what that means for the industry down the line.
Being able to overlay data points such as employment trends, inflation vs income levels, home price appreciation, and rent growth allows real estate professionals to get a more complete picture of the market and how it will be impacted by those factors. So even in times of potential turbulence, like the industry is experiencing right now, it is much easier to forecast what the future of the space looks like depending on both internal and external factors. This reduces panic and allows those in the space to adapt to market changes and better prepare rather than just being along for the ride.
The Future of Real Estate Data is Now
While utilizing data and analytics in real estate does not change the fundamentals of the space, it does provide greater insight and greater potential for success for industry professionals. The real estate market is not a murky crystal ball with a question mark for its future. There is more data available now than ever before, and it is critical, regardless of your role in the industry, to be utilizing it.
Data is helping to drive the industry and those within it forward, if they choose to use it.
