Eighteen years ago, four researchers from Montreat College published a master’s thesis detailing the results of a three-month study of “the effects of the internet on real estate” in their county in the spring of 1999. Using direct mail and self-addressed, stamped envelopes, the team surveyed residents of their North Carolina area to determine how internet usage affected their residential real estate transactions. Prior to reporting their results, they set the stage by mentioning a 1995 study, the most recent at that date, by the National Association of Realtors, which cited “consumer demand for more knowledgeable and professional agents” as the biggest need in the real estate industry. The team predicted, “Real estate professionals will no longer be the gatekeepers of real estate information in the future.”
It’s always interesting to look back at our predictions for the future, particularly where technology is concerned. No matter how sweeping a statement may be at the time it is made, when it comes to technological advances, our species nearly always manages to create euphemism out of grandiosity in startlingly short order. This particular prediction, however, held seeds that would grow to astonishing heights — thanks, in large part, to one of the greatest economic disasters in our recent history.
In 2000, the U.S. Census Bureau reported that just over half (54 million) of households had one or more computers. This was up nine percentage points from just 20 months earlier. However, only 42% of U.S. households had internet access for use with those home computers. By 2003, almost two-thirds of households had computers, and more than half as many had internet access. Many were using both to research their prospective home purchases as home values and ownership shot skyward.
By August 2006, the United States housing market was experiencing the initial tremors of a housing crash. Building permit applications were in freefall. Capital Economics was warning its clients via email updates with greetings including, “New day, same depressing housing story.” Lehman Brothers publicly stated “for sale” signs on houses were a more ominous economic indicator “than gas-price signs.” Only the Federal Reserve was still holding out hope, forecasting just that the economy would “slow” in the coming year.
Things looked dire, and indeed they were. What we did not see at the time, however, was how the housing and financial meltdowns of the mid-2000s would expedite the growth and importance of real estate technology over the next decade.
In a recent interview with our publication Think Realty Magazine, Rick Sharga recalled the “lightning-in-a-bottle moment” early on in the trajectory of the housing industry when his access to foreclosure data and the ability to explain it in accessible terms to the general public initiated and then cemented his reputation as an expert in real estate. It was also a harbinger of things to come: specifically, the overwhelming role that data, technology and data analytics would play in the recovery and new growth in the sector, extending all the way into the present.
Today, the biggest players in our industry are not just real estate investors; they are experts in economics, trends, statistics and (as always in real estate) the bottom line. Some of these players are individuals, and some are behemoth corporations, but nearly all have two things in common: access to housing data and the ability to leverage it.
Think about the big names in the industry today: Zillow.com, Realtor.com, Inman, Trulia, OfferPad, just to name a few. Throw in there the lesser-known but highly influential players taking the form of private equity funds, especially the ones with enough capital to literally alter the face of the markets in which they buy and sell. Not all of these names are new in the past five or even 10 years, but many of them are, and those that are not have evolved dramatically in that time.
Now, looking back at the housing crash at its pivotal point when the tremors were present and the momentum probably irreversible, we can see that our catastrophic housing correction may well have been the greatest boon possible for the technology sector and the individual real estate investor. Starting from the first signs of freefall, individual investors were diving in, leveraging their population’s innate creativity to gain ownership of as much distressed property as their strategy, market and investment capital allowed. So, by the way, did Warren Buffett.
Soon after, the funds followed, cleaning up the detritus of the investments purchased cheaply and in volumes too high for the individuals to handle, and with those purchases came an enormous volley of funding for real estate-related technology revolving around management, market analysis, cloud-based platforms of all types and bellwether identification. Today, the real estate technology sector is worth untold billions of dollars in both potential and real assets and intellectual property. One of the least “glamorous” sectors in the real estate tech industry -- relatively speaking, anyway -- smart cities, is projected to reach more than $34 billion in global investment dollars alone by 2020. Consider how much might be added to that tally when artificial intelligence, the internet of things and virtual reality are factored in.
The future of real estate and, indeed, our broader economy, is inextricably tied to technology. Given how closely most of us (real estate investors in particular) are already tethered to our smartphones, this is an easy prediction to make — almost as easy as those graduate students’ predictions about our industry 18 years ago. Every time you look at that smartphone now, however, be alert to how you are leveraging your awareness of real estate technology and innovation to effectively cultivate your own investment strategies and business.
The Catalyst For A Tech Turning Point: What The Housing Crash Truly Meant curated from Forbes - Real Estate
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