The Impact of Artificial Intelligence on the Real Estate Market
You probably don't think of artificial intelligence (AI) in real estate when you think of AI. Even though real estate investment trusts (REITs) are the big players, the industry has always needed to catch up; this is because most transactions are still done through standard brokers and independent landlords.
But, like much of the rest of the business world, the real estate industry is embracing the power of artificial intelligence (AI), which has implications for both industrial and residential real estate.
Artificial intelligence is a good fit for any business that deals with data, and there is a lot of data in real estate. Estimates and appraisals used to be based on neighbourhood comparisons and people's opinions, but AI-based programmes are increasingly used to make these kinds of estimates.
Even generative AI is now used to make three-dimensional models of homes so that potential buyers can see how they look on any connected device, like a smartphone or tablet. During the outbreak, when people were afraid to let people into their homes, the technology took off and has continued to grow.
Lastly, AI is used in smart home devices like thermostats, lights, cameras, and tracking devices that let landlords know if any problems, like a plumbing leak, need to be fixed.
In this look at AI in real estate, we'll talk about how the new technology is changing the real estate business and give some cases of how AI is used in real estate.
How to make sense of artificial intelligence
Most people think of artificial intelligence as the ability of computers and other tools to do things that require human intelligence.
One of the most common ways AI is used is in machine learning; this is done by giving machines a lot of data and teaching them to find trends, analyse data, and run forecasts and algorithms.
These forms are often used in real estate.
In a broader sense, artificial intelligence technology includes robotics, neural networks, voice recognition, and natural language processing. Computer vision is also used in businesses like self-driving cars.
Five ways that artificial intelligence is being applied to the real estate industry
1. Analytics for the future
Predictive analytics is one of the most common and valuable ways AI is used in real estate.
When you see an estimate of the value of a property, it is usually based on data from artificial intelligence that can predict what will happen in the future.
Zillow (Z 1.18%) (ZG 1.01%), the largest online real estate marketplace, uses AI for its "Zestimates," which are its valuation estimates, as well as for personalised suggestions, floor plans and photos.
Redfin, a competitor, also uses AI to make similar estimates, and it has teamed up with the company that made ChatGPT to make a chat-based search plugin that can help people find the right house for them.
Significantly when investing in business real estate, it's important to make predictions. Investors, agencies, and experts use AI to determine where the real estate market is going so they can get ahead of the competition and buy at the best price.
2. Modelling in 3D
Real estate is one industry that takes advantage of "digital twins," AI-based computer images that let users explore a place digitally. Visual representations are becoming more critical in real estate.
Matterport (MTTR 3.1%), a tech company, is one of the stars in the field. It makes 3D virtual tours of properties so potential buyers can use augmented reality and other features to explore a property before seeing it in person.
Anyone with a linked device can get a good look at the property, which makes it more likely that someone will buy it. It also saves buyers, sellers, and agents money because it checks out possible buyers to ensure they're serious.
Startups are making similar technologies that show renderings of places that don't exist yet. Some are geared towards helping builders and have tools to estimate costs based on different designs.
3. Smart home gadgets
Real estate is a huge business; property tech might be ignored next to REITs worth tens or hundreds of billions of dollars.
But property technology, or "proptech," is an area of the real estate business that is overgrowing. It focuses on things landlords and homeowners can use to keep an eye on their homes from afar. These include smart doorbells, smart locks, smart thermostats, cameras, and other smart home devices that can let people know if something goes wrong inside the house.
AI lets devices learn what settings work best for each person and change them as needed. They can save money on utilities, make tenants happier, help the owner stay current, and keep significant repairs from happening.
4. The use of AI in managing property
Another critical part of real estate is the management of properties. Artificial intelligence also helps managers find good renters, collect rent, and plan for repairs.
AI chatbots can be used to screen tenants like in other businesses for customer service. They can help customers through the application process and answer questions about rental rates and availability, and this takes some of the work off the hands of human workers.
AI can also help with processing payments, handling workflows, analysing the market, and handling collections.
AI assistants are also used to report how well leasing is going, so occupancy and operating efficiency can be improved.
5. Home loans
AI is also being used increasingly in the finance industry, including mortgages.
In underwriting, AI looks at a borrower's credit score, income, and job history to determine how risky the borrower is and what rate to charge.
Tools that use artificial intelligence can help find and stop fraud. They can also automate jobs like processing payments and talking to customers.
Some mortgage lenders, like Rocket Companies (RKT 2.68%), use AI to make decisions on mortgage applications almost as soon as they are submitted. For example, the company can approve a contract in as few as eight minutes.
Will AI change the way people buy and sell homes?
Real estate is a big, complicated, and usually slow-changing business. However, the examples above show that AI already affects areas like predictive analytics, property estimates, smart home devices, mortgages, etc.
As AI improves, it's likely to play an even more significant role in the real estate business.
If you want to invest in AI, look at AI stocks or AI exchange-traded funds (ETFs). You could also learn more about real estate investment and how AI can be used in real estate.
More real estate businesses will use AI in the future, so keep an eye out.