Artificial Intelligence (AI) is the ability for a machine to solve problems by learning over time. It is similar to the way a brain processes information when making a decision. The term was coined by John McCarthy in 1956 who also quipped, “as soon as it works, no one calls it AI anymore.”
That's started to happen. The technology is now so pervasive we no longer associate it with science fiction. From protecting you against credit card fraud, to recommending shows on Netflix and self-driving cars, this type of intelligence is spreading. That's evident by the explosive growth in startup funding since 2010. Investors and innovators alike realize this technology is the future.
Despite this trend, artificial intelligence is still in its infancy. Most computers today perform narrow tasks. Weak AI is when all inputs and outputs are defined, like beating humans at chess or go. This is where real estate websites are today. The consumers enter defined inputs (area, max spend, desired bedrooms) and the computer produces an output that matches those requirements.
To better replicate human thought process, computers need to achieve artificial general intelligence, also known as Strong or Full AI. This is achieved when computers pass the Turing Test, a blind test in which a human would communicate with both a person and computer to determine which is living and which is not. Human brains are still more powerful than machines today because of their architecture and capacity. We possess many layers of interconnected neurons working simultaneously to process information. Artificial neural networks are inspired by this design but still limited by current technology.
Computers will reach human brain capacity by 2025
So what does the future of real estate technology look like with Artificial Intelligence? Let's look at three common tools prevalent in real estate and see how they will evolve with AI.
Today Onboard's AVM is built using regression analysis based on previous home sales. Using property characteristics we identify similar properties which recently sold to develop an estimate of a property's market value. Although rarely exact, we partner with Corelogic to offer the best AVM in the industry. When Spencer Rascoff, CEO of Zillow, sold his house for $1.05m, his Zestimate had it at $1.75m, 40% above selling price. Ours was much closer at $1.07m.
The intelligent system will have the ability to represent and calculate the value based on many more variables. The graphic here demonstrates the complexity within the system where each layer represents a single "neuron" within the algorithm. This type of intelligence allows AVM systems to group variables that lead us to an initial approximation, much more accurate than just looking at home sales trends within an area. If you have the best house on the block, this type of intelligence would take that into account.
In the Future In the future it's feasible that an AVM system could be applied to home buyers, and not just sellers. What would that look like? What if you knew about the trends and tendencies of someone looking for a home. You knew what their income was and what qualities in a home were important to them. You could price homes not just based on the market, but based on individuals.
Real Estate Nurture Systems
Tomorrow Personal, Targeted Content - AddressReport is a solution recently acquired by Onboard which sends dynamic content to subscribers based on a property or area of their interest. Because it's dynamic, subscribers only get notifications when a data point changes - so it always feels new and relevant. Because it's based on a location they care about, they are more likely to open and engage with the e-mails. Messaging is no longer one-size-fits-all.
In the Future Personalized nurture campaigns are the future, as we've talked about at length. Soon you won't just send e-mail to someone based on the preferences they've given you, like AddressReport, but based on location, time of day, time of year, life event and even weather. Imagine the power of sending a specific, targeted, custom message to someone who you know is about to get married or have a baby or retire. You understand they're about to move, you can connect with them in a personal, relevant way, and become immediately helpful in their home search. That's powerful. It's easy to see why industry experts are now saying life event marketing is more effective and how this could directly tie to real estate.
Today Zillow. Yawn.
Tomorrow There is a trend among real estate portals to start empowering consumers more as they decide where to live. Comparison tools are getting more sophisticated and user-friendly. Places like Realstir are starting to enable visitors to compare areas much like consumers compare flights on Kayak. The real estate industry continues to be behind in this area, though. Think of Netflix. In 2012, 75% of their viewing was based on recommendations. Recommendations that use intelligence and are refined based on the consumer's interaction with their technology. That level of sophistication for two hours of your life. Real estate impacts how you'll spend the next 9 years on average. We can do better.
In the Future In the future, real estate portals won't make recommendations based on physical characteristics (# of rooms, price, square footage), but based on the consumer's personal value system. Properties will be matched to individuals based on personality traits and preferences. What if a consumer filled out a profile and was matched with properties that best fit his or her ideologies? If OK Cupid can do this, we certainly should be able to. Using this methodology, portals would deliver fewer, higher quality properties based on things that really matter to the consumer. Today, portals seem to display more information in their effort to provide value. That's way off. Portals don't need to display more information, they need to display the right information. And you only know what's right when you start to really know your consumer. This is the future and it's important. Because we're selling so much more than beds and baths. Life happens where you live. We owe it to real estate consumers to improve this experience.
This is a big subject, so look for more here at Onblog where we'll discuss how this type of intelligence could affect the various players in real estate and the buying cycle. If you have ideas, suggestions, or thoughts, leave them in the comments section. If you'd like to find out more about this exciting trend, fill out the form below and we'll include you on our mailing list.