The real estate industry has long operated according to its own traditions, but the availability of huge volumes of data is revolutionizing the way the industry works. Big data analysis techniques are creating a new real estate market in which both customers and agents are better informed than ever before.
Companies such as Zillow and Trulia have made masses of information available to real estate consumers, including recent sale prices for homes in a particular neighborhood, as well as information about local schools, crime rates, and other neighborhood statistics. This data is drawn from multiple sources and combined to give a comprehensive overview of an area.
These sites have moved beyond simply providing raw data. Zillow now uses detailed algorithms to calculate an estimated value – or “Zestimate” – for every home. These algorithms draw on census data, home listings and market trends to calculate an estimated value of the price that the home might attract.
It’s not just consumers who are using big data to inform their house buying and selling decisions. Banks are also drawing on vast pools of data to predict the risk that a particular mortgage application could pose, using information about both the value of the home and the applicant’s financial situation and history. In addition, banks are also avoiding losing out on foreclosure and short sales, as big data is helping them to predict the maximum sale value that the market can bear.
However, big data opens the market for players other than banks to get involved in real estate transactions. A San Francisco startup named OpenDoor uses big data analysis to instantly provide evaluations to homeowners looking to sell, and then provides them with the opportunity to sell their home instantly online. The whole process can be completed in as little as three days, offering a fast alternative to traditional real estate trading channels. Like cloud computing, this new approach to home-selling is using technology to improve connectivity and therefore provide consumers with greater convenience in their lives.
With so much information available at the fingertips of the average person, it may seem that the role of the real estate agent is shrinking fast. Real estate expert Jerry Pinkas prefers to talk about the shift in terms of the role becoming more specialized. “The Internet is a good place to start,” he says, but emphasizes that real estate agents can provide local knowledge at a far finer level of detail than big data is currently able to provide. Jim Esposito, from Fort Lauderdale Real Estate, agrees, saying that “big data sites may be useful” when starting to search for a home, but “when you seriously start to focus in on an area or neighborhood, you really need a local agent.”
Real estate agents are not just competing with big data, but also using it to inform the way they pitch their properties to consumers. By using data to see what consumers are looking for when they search for real estate online, agencies can focus their marketing efforts on the most profitable niches to maximize their returns.
With ever-greater amount of data being gathered all the time, from search data to surveys to cloud computing that track our daily lives, one thing is for sure; the role of big data in real estate is only going to grow more significant as the future unfolds.