Highlights 3| Silicon Valley Innovation During and After the Pandemic (Week 3: Real Estate Technology)
It is an understatement to say that Covid-19 has had a sizable impact on global society and economy. As such, SVTC is using its platform to host virtual events. Through dialogue with scientific experts from various fields, we hope to explain to Chinese audiences how Silicon Valley is innovating during the pandemic and the future direction of innovation in post-pandemic times. These talks will take place on Saturdays at 9:30-10:30 am CST (Fridays, 6:30-7:30pm PDT).
Session three’s conversation was hosted by Judy Lee, the General Manager of the Silicon Valley Technology Council (SVTC). Judy also holds a California real estate agent license and has considerable experience in real estate investment. Our guest was Helen Chong, Partner and Founder of Haylen Group as well as a Certified Commercial Investment Member. With their combined years of experience in real estate and investment, Helen and Judy shared insightful analysis on changes in the Silicon Valley real estate industry due to the pandemic and the future trends in the real estate market through the lens of real estate transactions and transfers, marketing technology, and financial technology.、
Haylen Group is headquartered in the San Francisco Bay Area, the heart of Silicon Valley. The company's main business is to help customers buy and sell houses and to help customers do real estate investment analysis from an investment perspective. The company's current various real estate technology tools are backed by large Silicon Valley tech companies.
During Helen’s presentation, we learned that in March 2020, California's Silicon Valley Bay Area real estate prices rose by 1.5% compared with March 2019, of which the San Mateo area rose by 6.5%, the Alameda area by 5.1%, and the Santa Clara area by 4.8%.
After the outbreak, the number of new listings from March 16 to May 6 decreased by 40% compared to the same period in 2019, and withdrawal transactions increased by 70%. The main reason is that during the epidemic, a shelter-in-place order was issued, which made it impossible for customers to visit properties. Many buyers are choosing to wait for the pandemic to end, so they withdrew their transactions. However, new listings will come back after the shelter-in-place order ends.
The shelter-in-place order has caused the number of houses for sale to drop by 40% after the effective date. After that, the number of houses for sale has been on the rise, although it is fewer than the number in 2019.
In the 7-day period from May 1 to May 7, 324 new homes were added, of which 199 new homes, accounting for 60%, were listed between May 5 to May 7. On May 4, some of the shelter-in-place restrictions were lifting, including allowing people to visit properties. Helen believes that there will be more and more new listings in the future.
Will automation/technology replace people in completing real estate transfers?
Transaction
It is common to sign real estate documents online, For example, the American technology company Docusign
Real estate transactions in the Bay Area did not stop even during the pandemic. he main reason being that almost all US real estate agents currently use Docusign (electronic signature), E-notary (electronic notarization), E-recording (electronic records) and other online real estate transfer technology tools.
Helen explained that Docusign has been in use for 10 years, and many customers read and sign contracts on the computer. Electronic notarization is currently available in some states like New York, but the California government still does not allow it. Customers would instead sign in front of their houses while maintaining social distancing, rather than going into the office to sign. Helen believes that the situation created by the pandemic will push the California government to allow electronic notarization. She added that the government now does house inspections over video. Due to the pandemic, all companies and organizations must speed up their use of technology. In fact, these technologies have always been there, but people did not use them. However, technology-assisted real estate transactions will increasingly become commonplace.
Property technology's online marketing presence is rapidly growing
Marketing
3D Virtual Tour (virtual reality viewing)
It is becoming more popular to use 3D virtual tours for real estate marketing, since it can provide more information than still photos can, such as lighting and dimensionality. Before, customers had to visit more than a dozen places a day to view houses they were interested in buying. Now, customers can first take virtual house tours with 3D tour technology, and then select a few to visit in person. Real estate marketing tools with virtual reality and augmented reality are now becoming more common.
Helen believes that more and more customers will change their buying habits in the future, and the trend will be to do virtual viewings followed by on-site viewings. The virtual tours will not replace one-site visits in the final decision making process. However, it will affect which houses customers will ultimately consider.
Buyers will still choose to see the property in person. Because certain aspects, like the surrounding neighborhood, the sound insulation of the house, etc. can only be experienced in person. However, virtual house tours will still be advantageous to both sellers and buyers: buyers don’t have to visit as many houses in person as before, and the seller will not need to accommodate as many prospective buyers’ visits. Virtual tours can screen buyers, as only those still interested after the virtual tour will likely choose to visit in person. For Asian customers, 3D tours will also be beneficial, since it’s often important for them to share views of the house they’re hoping to buy with family members who live in Asia.
Real estate finance and data analysis
New FinTech in Real Estate
Using real estate fintech for purchasing houses
Bitcoin and blockchain for purchasing houses
At present, there are many ways to buy a house outside of traditional loans and cash. For example, Flyhomes—a tech company in the US real estate industry—provides an option called the Cash Offer, for which Flyhomes put their cash on the line to help clients buy homes. Buyers can likely get a cash offer discount and preference. Since Flyhomes is very popular at the moment, Judy asked Helen about her views on this new real estate tech company.
Helen believes that Flyhomes is more suitable in the seller's market, as its leverage is weakened in the buyer's market. Because cash buyers will have price discounts, sellers will tend to pick the highest bidders. After the pandemic, Flyhomes may become less popular. The reason is that although cash offers are the ideal option, traditional loans are still very common. Every lender's situation is different: with some customers, the situation is more complicated, so banks can be reluctant to lend. Thus, it is still best to find an experienced lender to help in the situation.
Regarding the purchase of real estate using Bitcoin and blockchain, Helen feels that many sellers are reluctant to accept tokens because the price of tokens can fluctuate greatly in a short amount of time. It may take many years before using blockchain technology for real estate transactions will be adopted, because the government is reluctant to make changes soon to use this technology.
Big data analysis
American real estate tech companies Zillow, Redfin
Judy talked about her experience of investing in real estate. Before real estate big data was not transparent enough; now however, there are websites in the United States like Zillow, which allows people to see how much their house is worth on the Internet. Judy asked if real estate appraisals can be done by technology itself or coexist with humans as technology involves more and more big data and AI? "
Helen believes that the real estate agent's sweet spot is to find a house that others could not find, but nowadays, people can find such houses on the Internet. However, artificial intelligence and machine learning cannot replace human knowledge, professionalism, experience, and roles as advisors. For example, a machine cannot replace a broker's experience—gained from hundreds of houses—in the transaction, construction, and analysis of houses.
Judy concluded that certain technology has already been used in real estate transactions for many years, such as electronic signatures and electronic notarization. These parts of the process can be done by artificial intelligence or technology in place of humans. In real estate marketing, technology also plays an increasingly important role. However, when it comes to subjective real estate data analysis, as well as experience in buying houses, still have to rely on humans.
With all the insights shared by Judy and Helen, the attendees were eager to ask follow-up questions and engage in discussion. Below, we will summarize three questions that many of the attendees shared.
1. It has been rumored that Amazon was also working on a real estate trading platform, but Helen believes that customers will still choose a professional real estate agent to perform transactions and are unlikely to use a platform like Amazon’s. Because buying a house is different from buying other goods, customers still need the help and insights of real estate agents.
2. With regards to the future of real estate agents, Helen also made some suggestions. In the past, she explained that to be a real estate agent, all someone had to do before they practiced was to get a license. Now though, intermediaries must continue to learn even after receiving a license and need to obtain more certificates if they don’t want to be replaced by computer technology. Real estate agents should plan to develop more into real estate investment analysis and development.
3. For the concepts of Co-Living and Co-working, Helen believes that this concept is a good real estate investment trend. Student dorms, for example, were a very good investment before the pandemic. Although many students moved out of them due to the pandemic. When it’s safe to do so, students will still return to campus since the need for community in schools is still present. Thus, the difficulty here will be temporary. In addition to schools, tourism and hotel catering have been negatively impacted—some hotel occupancy rates have dropped to 5%. In the next 2 years, the commercial real estate industry will be changed due to the pandemic. Office working, for example, might look drastically different in the near future, as employees will be reluctant to return to the office due to Covid-19 concerns. As such, employers will want to reduce the area of rented offices. Shared office will become more common, because a lot of work can be done remotely over the Internet. Small companies will prefer the cost-effectiveness and flexibility of shared offices.
This week, our event focused on how technological innovation in the real estate industry has been impacted by the pandemic. Judy and our guest, Helen, discussed the changes wrought by the pandemic to the real estate industry from three aspects: transactions, marketing, finance and big data.
Once again, we’d like to thank Helen for joining us as a guest this week, and we’d also like to thank all the attendees for their participation. If you have any topics of interest, please contact us.