Data and information are all around us. Big data, data analytics, now AI … information, especially with respect to real estate is more transparent than ever, with the likes of Streeteasy, Trulia and Curbed, and even more data-laden competitors coming online seemingly every month…it would make sense to assume, then, that such overflowing information would make buyers and sellers more savvy and wise about the market. And yet this assumption would be flawed. Repeat after us: data is only data. And more data does not necessarily equate into more wisdom; often the opposite is true. Without the context and experience to make it sing, it’s one piece of the puzzle at best and unconstructive noise at worst. But boy is it addictive; and boy can it lead many down the wrong path.
Data does not equal strategy. Data does not equal wisdom.
Think about it this way: the real estate market has become incredibly transparent over the last decade, with a growing number of sites and services all providing more information and data. If the premise that data = wisdom holds, then we should have seen a precipitous drop in broker-led transactions, along with an exponential spike in FSBOs and private transactions. But we haven’t. Why? Because having and owning the information is no longer the broker’s value add; it’s wisdom and its application to serve you. Even leveraging pricing algorithms or savvy market trends falls short of being able to know how and when to apply this information in a way that moves the deal forward.
It all gets down to People.
We can’t tell you how many people become attached to their numbers, the comps, and the research they perform. And the more research they do, the more attached they become (it makes sense, considering how much time was invested). But this neglects the broader reality that:
- Real estate is still not hyper efficient. Emotions and beliefs continue to play a significant role due to the personal nature of a home versus orange juice futures, as an example.
- Each property is unique in some capacity. Whether the quality, exposure, or floor, no two properties are exactly alike. Which means that, technically, every property is unique; this is not a commodity product.
- The market is incredibly fluid. One particularly positive economic outlook or one material stock market crash can impact mindsets, both on the buying and selling end – and things move fast, faster than ever, in fact. Further, data points from a mere 6 months ago can already be stale and irrelevant. By the time the data is captured and analyzed, it’s often a lagging indicator of the market, not a leading one.
At the end of the day, the wonderful world of real estate goes ‘round based on one individual’s desire to sell matching one individual’s willingness to buy. Our advice to our loyal readers: try to look at the bigger picture and the longer time horizon; make sure to balance a potential obsession with the dollars and cents with the 5+ year horizon ahead. (We’ve seen buyers and sellers walk away from the table over a $10k difference price on a $2 million+ apartment more times than we can recall; that’s just silly.) All of this is to say that the data and numbers are important, but they are only one piece of the bigger picture.