360° Coverage : How Smart Houses And Big Data Will Change Real Estate Economics

2 Updates

How Smart Houses And Big Data Will Change Real Estate Economics

May 19 2014, 7:42am CDT | by

One of the features of big data is the accumulation of massive amounts of information that are not suited to traditional econometric and statistical techniques. I predict that this phenomenon will...

Filed under: news

 
 
 

16 weeks ago

How Smart Houses And Big Data Will Change Real Estate Economics

May 19 2014, 7:42am CDT | by

One of the features of big data is the accumulation of massive amounts of information that are not suited to traditional econometric and statistical techniques. I predict that this phenomenon will someday change the way real estate economics are done.

Models of house prices are used in a lot of ways. This is how a lot of cities and counties do “mass appriasals”. It’s how house price indexes separate price changes from quality changes. When companies like Zillow generate Zestimates of what a house is worth, these are the models underlying them. It’s how the Bureau of Labor statistics adjusts housing rents for quality changes and depreciation when computing the CPI.

The general form of these models is to take the log of price as the dependent variable, and housing and neighborhood characteristics as the independent variable. But the list of independent variables that is usually available gives you a relatively limited description. While the exact list varies form data source to data source, typically it might look like: building square footage, lot square footage, number of stories, number of bedrooms, number of bathrooms, central air (yes/no), number of fireplaces, garage size, finished basement (yes/no), and of course address.  Using this last variable you can get a lot more information about the neighborhood from other data sources.

This is the basics of what a lot of house price models are dealing with. It might not sound like a lot of information, but in many circumstances you can explain a huge amount of the variation in house prices using relatively limited information like this. In fact using just neighborhood indicators and square footage you can usually explain a significant amount of the variation. However, even 80% of the variation explained still leaves a lot unexplained. And intuitively these kinds of variables still leave a lot of information out. This is where I think things will be changing in the future due to what people are calling “smart homes”.

There are a variety of “smart home” products on the market now, but these things are going to get more and more sophisticated soon. The cuurent generation of Roombas just sort of bounce around the room, but other robot vacuums scan the room first and make a plan. The Nest smart thermostat that Google recently acquired recently pays attention to where you are in your house and when and remembers this. It’s easy to imagine where this leads in the future: Robot vacuums will know the dimension of every room in the house, the kind of flooring in each, and maybe even the quality and age of the flooring; smart TVs will know which room is the living room; Nest knows which room is the kitchen, which are the bedrooms, and how energy efficient the home is. What’s more Nest will be able to measure the extent to which the house is fully utilized and therefore how convenient the layout is; in other words, a Walkscore for your home.

And this is just the information that smart homes will bring. There is a whole other set of high dimension data coming on neighborhoods. This includes data tracking the paths of bikers and runners, counting potholes, measuring the location and quality of amenities like the real Walkscore measure, and so forth. This provides even wider data that often has both high frequency spatial and time dimensionality. Some of this stuff is being incorporated in analysis already (see for example research from Emily Washington and Eli Dourado on Walkscore). But there is a long way to go in terms of incorporating a lot of high-dimensional property and neighborhood data into house price models.

In short, you can imagine the creation of very, very wide high-dimension datasets. What do you do with a dataset that “knows” your house with this level of detail? Suddenly variable selction becomes an important part of the challenge, and economic theory may provide little guidance. The use of principle components to create measures of “house quality” from several variables is not new in real estate economics, but that is really just scratching the surface when it comes to machine learning models that could be utilized and doesn’t really capture the potentially highly non-linear and interactive nature of the relationships between these variables.

High-frequency and high-dimensional datasets are going to change a lot of research that until now has been relatively simple. Researchers just starting out their academic careers should definitely be taking a look at machine learning tools in anticipation of the exciting future of data.

 
Update
2

2 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

2 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tragedies of MH370 and MH ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

How corn plants defend against pathogen attack
Washington, Sep 14 (IANS) Researchers from the North Carolina State University have identified crucial genes and cellular processes that appear to control the so-called hyper-sensitive defence response (HR) in corn.
 
 
EU finance ministers call for more investments to stimulate growth
Milan (Italy), Sep 14 (IANS) More investments were the only way for the European Union (EU) to accelerate its too slow recovery, finance ministers agreed at the Ecofin meeting held in Italy's Milan Saturday.
 
 
Climate change to increase pests in coffee crops: Expert
Bogota, Sep 13 (IANS/EFE) Pests and diseases such as coffee berry borer, coffee rust and leaf spot disease could make a strong comeback due to drastic climate change, a scientist has warned.
 
 
Heart drug could be cure for Ebola: British experts
London, Sep 13 (IANS) Researchers at the University of Liverpool have made a breakthrough that can lead to a cure for the deadly Ebola virus currently sweeping through West Africa, media reports said.
 
 
 

Latest from the Network

Indian bags second spot at pageant
Quito, Sep 14 (IANS) Goa-based model Gail Nicole Da Silva was placed second in the Miss United Continent 2014. The first spot went to Dominican Republic's Geisha Montes De Oca and Venezuela's Wi May Nava stood third....
Read more on Celebrity Balla
 
Sporting held to 1-1 draw by Belenenses
Lisbon, Sep 14 (IANS) Sporting Lisbon were held to a 1-1 draw by Belenenses in the fourth round of the Portuguese football league at the Alvalade Stadium here. Brazilian striker Deyverson scored in the 28th minute...
Read more on Sport Balla
 
Jessie J photoshops cellulite marks
London, Sep 14 (IANS) British singer Jessie J says she erased traces of the unsightly wrinkles from her legs on the cover photo for her latest album "Sweet Talker". The singer appears in nothing but a pair of black...
Read more on Celebrity Balla
 
What's new about Foo Fighters's new album?
Los Angeles, Sep 14 (IANS) Rock band Foo Fighters's bassist Nate Mendel says that their new album "Sonic Highways" isn't as traditional as their other records. In an interview with NME magazine, Mendel has spoken out...
Read more on Celebrity Balla
 
Most US college students dependent on smartphones: Study
New York, Sep 14 (IANS) Nearly 75 percent of the college students in the US are dependent on smartphones while one in five consider themselves to be "lost" without the device, says a study. While 86 percent said they...
Read more on Celebrity Balla
 
Three Big Bash League teams fined
Melbourne, Sep 14 (IANS) Cricket Australia (CA) Sunday announced that KFC Big Bash League teams, the Hobart Hurricanes, Brisbane Heat and Sydney Sixers, have each been fined for breaching the competition's Player...
Read more on Sport Balla
 
Seven killed in US drone strike in Pakistan
Islamabad, Sep 14 (IANS) At least seven suspected militants were killed in a US drone strike along the Pakistan-Afghanistan border, media reported Sunday. The attack was carried out at the border along the South...
Read more on Politics Balla
 
How corn plants defend against pathogen attack
Washington, Sep 14 (IANS) Researchers from the North Carolina State University have identified crucial genes and cellular processes that appear to control the so-called hyper-sensitive defence response (HR) in corn....
Read more on Apple Balla
 
Zenit continue winning run after beating Dinamo
St. Petersburg, Sep 14 (IANS) Russia's Zenit St. Petersburg overcame a stiff challenge from second-placed Dinamo Moscow to extend their lead to six points at the top of the Russian Premier League after a 3-2 thriller...
Read more on Sport Balla
 
Australia to send military forces to Middle East
Canberra, Sep 14 (IANS) The Australian government Sunday decided to send military forces to the Middle East as part of the international efforts to combat the Islamic State (IS) militants. Prime Minister Tony Abbott...
Read more on Politics Balla