Considered to be the largest commodity in the world, real estate has quite a notable exception with an estimated $217 trillion valuation.
Technology, with the emergence of the Internet had greatly impact the whole industry benefiting buyers, sellers, and agents. From the good old day’s basic cold calls, print ads, emails, open house visit, etc., we are now moving to a wide variety of social media sites, virtual apps, IoT devices, chatbots, cloud computing, advanced analytics, and blockchain. Thus, there’s huge room for sales, purchases, and prospects.
Not just that, technology has made it easier to get data on quality via user ratings on certain websites. People doesn’t only look for accessibility, pleasant climates, booming economies, and appealing amenities, but also the quality of nearby amenities.
A recent study in the Journal of Urban Economics that uses data from Washington D.C. finds that restaurant quality, as measured by Yelp reviews, impacts property values: A doubling of the number of highly rated restaurants (rating > 3.4) within a mile radius of a home is associated with an 11.5% increase in the home’s value.
Information accessibility through technology thus, opens a wide market landscape with specific variables, thus, affecting housing prices.
As the aforementioned study has shown, housing prices increase in areas with the best amenities as the quality of those amenities becomes well known.
Technology plays a major role in making it easier for everyone to share and gather digital information in acquiring homes.It helps buyers getting more-realistic view of the property plus, the quality of amenities available on that certain area. The higher the housing demand on that area, the higher the housing value of the homes located nearby.
The housing industry does affects customer decision at the same time, the market value of homes.
The Ever-changing Housing Industry with Technology
Traditionally based on three assets, namely land, building and money, the housing sector under the real estate industry has now digital information employed to technologically assess in terms of demographics, government policies, interest rates on certain locations through valuable apps and websites, enabling customers in need of buying or renting homes to deeply monitor housing rates. This is very much useful for the younger generation who will interested in home ownership.
In 2018, CoreLogic together with RTi Research of Norwalk, Conn., conducted an extensive consumer housing sentiment study, combining consumer and property insights. In their findings, potential buyers in the younger millennial demographic have the desire to buy, 40% are extremely or very interested in home ownership.
In fact, 64% say they regularly monitor home values in their local market. However, while, 80% of younger millennials plan to move in the next 4 or 5 years, 73% cite affordability as a barrier to home ownership (far higher than any other age cohort).
“Our consumer research indicates younger millennials want to purchase homes but the majority of them consider affordability a key obstacle,” said Frank Martell, president and CEO of CoreLogic. “Less than half of younger millennials who are currently renting feel confident they will qualify for a mortgage, especially in such a competitive environment.”
In talking about home value, online platforms such as Airbnb claimed that they bring more money to cities in both rental fees and the money that renters spend during their stays.The company also notes that roughly three-quarters of its listings aren’t in traditional tourist neighbourhoods, which means that money is going to communities typically ignored by the hospitality industry. Knowing that the company offers over 5 million properties, in over 85,000 cities across the world, and its market valuation exceeds $30 billion.
There is no further evidence on how they came to that conclusion.
Then on, a working paper has been published centering about the effects of home sharing on house prices and rents, collecting data from 3 sources:
- consumer-facing information, from Airbnb, about the complete set of Airbnb properties in the U.S. (there are more than 1 million) and the hosts who offer them;
- zip code–level information, from Zillow, about rental rates and housing prices in the U.S. real estate market; and
- zip code–level data from the American Community Survey, an ongoing survey by the U.S. Census Bureau, including median household incomes, populations, employment rates, and education levels. We combined these different sources of information in order to study the impact of Airbnb on the housing market.
Investigation results show that in aggregate, the growth in home-sharing through Airbnb contributes to about 1/5 of the average annual increase in U.S. rents and about 1/7 of the average annual increase in U.S. housing prices. By contrast, annual zip code demographic changes and general city trends contribute about 3/4 of the total rent growth and about 3/4 of the total housing price growth.
Technology impact in the housing industry has underlying economics.
Evidences in the aforementioned study about Airbnb show that the platform affects the housing market through the reallocation of housing stock. And by looking at housing vacancies, Airbnb supplies two things: it positively correlates with the share of homes that are vacant for seasonal or recreational use and negatively correlates with the share of homes in the market for long-term rentals.
By Tuan Nguyen