How AI Can Help Generate Market And Property Insights

Andrei Kasyanau is the co-founder and CEO at Glorium Technologies. Startup advisor and an expert in health and real estate tech.

The real estate industry is known to be quite conservative and slow when it comes to adapting to technological changes in the market. Integrating new technologies requires a cultural shift that embraces knowledge gaps and other transitional challenges.

So far, generative AI has established itself well in real estate marketing. It facilitates customer journeys like never before, improves content creation and changes customer relationships. However, there is a different kind of artificial intelligence that is also making powerful strides in the real estate industry: predictive AI. It utilizes historical data and algorithms to predict market trends and accurately forecast property values.

AI is already showing signs of making significant progress in real estate. The industry is still in the early stages of adoption, yet the potential for improvement is vast, particularly in areas of market prediction accuracy and personalized property recommendations. At this pace, there will be no better time to take action than now. Early adopters are already gaining a competitive edge, and the technology is only becoming more sophisticated.

How Does it Work? The Foundation of AI-Powered Predictive Analytics

At its core, AI-powered predictive analytics in real estate relies on vast amounts of data and complex algorithms to identify patterns and make forecasts. The system analyzes historical sales data, demographic information, economic indicators and unstructured data like social media trends or news articles.

We use machine learning algorithms, including supervised, unsupervised, and reinforcement learning models, in real estate predictive analytics. These algorithms learn from past data to make predictions about future outcomes. We can already see major companies like Compass and Zillow taking advantage of this and experimenting with AI tools.

For example, Compass, a tech-forward real estate brokerage, implemented these AI tools to help agents identify sellers before their homes were even listed. The company launched a machine learning-driven recommendation system called “Likely to Sell” in 2020 that helped real estate agents connect with the right contacts. While it’s still going to take some time to observe the results of this system better, there is the potential for it to help agents with their productivity.

On the Compass Q2 2024 earnings conference call, found and CEO Robert Reffkin reported that the company’s AI model, which currently accurately describes 7% of the market, is already used for real estate market forecasting and offers a foundation for further market extrapolation.

AI In Real Estate Predicting Market Trends

One of the most powerful applications of AI in real estate is its remarkable accuracy in predicting market trends. A prime example would be how AI models were able to foresee the post-pandemic suburban boom.

Zillow, a real estate marketplace, used its AI models along with data from the U.S. Census Bureau to identify a significant trend. The models predicted that the rise of remote work would enable many urban renters to purchase homes in suburban areas, an effect of no longer having to go to city centers. This insight proved itself valuable, as the real estate market indeed saw a surge in suburban home purchases following the 2019 pandemic.

Beyond identifying large-scale shifts, AI has the power to forecast price fluctuations and market cycles. By analyzing factors like interest rates, employment data and construction starts, AI models can predict how home prices might be affected in specific neighborhoods or cities. This detailed level of insight can be crucial for investors, developers and homebuyers.

AI In Real Estate Improves Property Valuation Accuracy

Artificial intelligence can also play a significant role when it comes to determining property valuation by helping human insights with accurate data analysis and predictive modeling. While automated valuation models use machine learning algorithms to estimate a property’s value based on its comparable sales, property characteristics and market trends, they also use data patterns hidden from human perception, entirely beyond human reach.

The following is a real-life example that illustrates the power of AI-driven property valuation. We recently led a project for a real estate organization seeking to automate property estimation to identify attractive offers and observe market trends. We created a deep learning model capable of predicting property prices when given real-time market data, discovering the factors that affect prices. The trend analysis dashboard allowed the organization to identify undervalued properties and make data-backed decisions.

Challenges And Limitations Of Implementing AI In Real Estate

While AI brings many benefits to real estate, it has its own challenges to bear in mind. Data quality and availability can be a significant hindrance, as AI models are only as good as the data they’re trained on. In some projects, we spend considerable time sourcing, cleaning and structuring data before we can even begin building models.

Another significant challenge we encounter is the lack of expertise in AI in real estate organizations. This is why we often recommend creating a role for a chief AI officer or bringing in dedicated AI experts. These specialists can bridge the gap between technology and business needs, ensuring that AI implementations deliver real value.

The Next Generation Of Possibilities

As AI technology continues to evolve, the impact of AI in real estate will grow, along with other technologies, such as blockchain, for secure and transparent transactions.

Technologies evolve, and complexity grows; therefore, successful implementation of AI in real estate requires more than just acquiring AI tools. It demands the experience and guidance of AI specialists. The challenges are real, but so are the rewards. AI-powered predictive analytics is not just the future of real estate—it’s increasingly the present. The real estate professionals who can effectively harness the power of AI will be best positioned to thrive in the years to come.

Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?