Where Science Meets Art In Multifamily Investing: RealPage Market Analytics
Traditional ways to forecast the multifamily housing market are taking a back seat to a fine blend of artificial intelligence and the expertise of market researchers and analysts.
Job growth, new supply and apartment permitting have been key indicators of a market’s economic health, but they are only a few pieces of what makes the quintessential national multifamily forecast. In a Dallas suburb, heavy computational and statistical power is hard at work around the clock for 365 days a year, dissecting market data and creating accurate forecasts.
Whatever market performance data that can be measured is run through a gamut of computations. Because any good forecast, analysts argue, be anchored with solid statistical power.
Just look at the accuracy of local weather forecasting. Proven atmospheric modeling practices based on decades of data yield successful rain, sleet, snow and other weather predictions more often than not. With frightening precision, in some cases.
Yet deciphering the statistical data requires a helping hand. That’s where the weather forecaster enters the picture.
Variable-rich market forecasts more important than ever
The same can be said for multifamily market forecasting. Behind a digital artificial intelligence, forecasting engine is a team of analysts and economists at RealPage® who make sense of the data. Metro-specific models calibrated with market-level expertise arrive at projections to help property investors make decisions in markets everywhere.
The intersection of statistics and human interpretation is where knowledge bands together with virtuosity.
Variable-rich forecasts, tailored to specific markets based on the blend of AI and market expertise, are more important now than ever.
“Making sure forecast variables are tailored to individual markets is a big differentiator,” RealPage Senior Market Analytics Manager Carl Whitaker said. “We want to make sure we are capturing all sorts of drivers to tailor forecasts to the market level.”
Crunching the data and tailoring it to the market
Take the tale of a few cities.
In Houston, an investor is likely to get a different market analysis with similar variables than in Boston, New York or San Francisco. To arrive at the most accurate picture, national data is blended with a number of factors specific to the market.
For example, the health of the oil and gas market and its ability to create jobs is a good predictor of Houston’s future economic health and apartment demands. Another factor is that single-family homes are usually affordable and in good supply and have room for price acceleration, which puts pressure on apartment rents.
In Boston and New York, the cost to own your own home is far more expensive, which allows apartment rents more room for growth. Also, if the national energy market tanks, New Yorkers and Bostonians are less likely to suffer wage loss compared to major oil- and gas-producing areas.
Those variables enhance the conversation for an investor who is looking to spend millions of development dollars in those markets. A cookie-cutter investment strategy would clearly have flaws.
“That’s where science meets the art,” Whitaker said. “That science is the stats, and the art is how we interpret the models to provide actionable insights beyond the numbers.”
Picking up on the subtleties of a market
RealPage Market Analytics collects transactional data each day from the entire ecosystem of multifamily housing and enables near real-time evaluations of market forecasts. RealPage data science employs a multitude of models and artificial intelligence methods through the only software in the world that unearths new “laws” from observational data.
With its vital compilations, stakeholders can view, visualize and leverage insights, information and reports at the market, submarket and property levels. Data provides 100% visibility into market, business and asset performance.
What is impressive about the power of RealPage data science, Whitaker says, is that extra-special intuitiveness the forecasting engine possesses.
A couple of years ago, he pored over San Antonio market data and noted the two dozen or so variables that went into the forecast. Then he saw something that spoke to the software’s true power of market intelligence. The software measured the impact of retail sales on rent growth and occupancy for a city that is devoid of a big corporate culture but strong in tourism.
“At first, it was an output that we had to analyze a bit further,” Whitaker said.
But he thought about the generation of so many jobs because shoppers who converge on the city each year look for places to spend their money. Until then, retail sales wasn’t considered as big a variable in determining market performance as it is now.
“Even before we trained the digital forecasting tool, it picked up on that,” Whitaker said. “It was able to recognize that retail sales are a predictor of economic health and a predictor of what the rental landscape looks like in San Antonio.”
Throw in a few single-family drivers for this metro – San Antonio is known for affordable single-family housing, which keeps the market’s occupancy rates and renewal conversions among the lowest in the nation – and the complete picture of the Alamo City comes into view.
“It becomes a highly predictive and accurate forecast,” he said.
Market intelligence at your fingertips
RealPage analysts and economists frequently share their insights with clients who subscribe to the service. In addition, a wealth of information through market commentaries, webcasts and reports is shared on RealPage’s Market Analytics Blog.
The blog features a variety of articles on research and trends, local markets and student housing. Market analysis and happenings are routinely shared, but they have been ramped up during the pandemic.
“The market webcasts, blogs and other things are market analysis in action,” Whitaker said. “The data we present is all from the Market Analytics solution, and you can have some of that at your fingertips.”
Right at the point where science meets art.
Learn more about how multifamily’s unparalleled market intelligence platform provides 100% visibility into market, business and asset performance.