There will be a follow up to this article tomorrow about Real Estate Technology. Computers have changed the way the world does business. There are two functions that are the basis of this article which are computers pulling data from other computers, then making determinations about that data, called algorithms.
The most common of this, for Real Estate, is tax assessor records. Like so many things having to do with computers the government lead the way on this technology. Computers took in what assessors thought was a value of properties, then pulled, and added new sales data. Like the Census there are periods of physically viewing properties in an area for adjustment, but most of the time the assessor’s office relies on computer generated modeling of what properties are worth.
Sales data of property has gotten to be a hotly contested determination of value. In the previous article I talked about the Case-Schiller Index of property values. It was supposed to be like a commodities trading Index. The idea was to follow Real Estate sales to determine a value. Banks used the increased sales prices for putting a value on Mortgage Backed Securities. That’s now getting to be a big problem.
Real Estate in most urban settings is unique. After this last set of development even rural areas have a greater diversity of properties, housing units, and development tracks. Development, for as homogeneous it became, only compounded the diversity. Most specifically most of the new development, that was so profitable, skewed the algorithms.
If you read the previous articles you can get the trend of the articles. Computers, or simply looking at data, doesn’t mean anything without interpretation. The interpretation is what we are going to explore.
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