In hindsight, Big Data could have played a crucial role in preventing the housing bubble of 2007 and 2008. There was an unbelievable confidence in the increasing prices of single-family homes. They could have used Google searches that focus on real estate housing. It could have an enormous impact on those years.
Was it possible for them to prevent the housing bubble if they know how to use Big Data? But at that time, the power of Big Data is not yet well-known and appreciated. They are already using Google searches at that time. If they only knew how to use Big Data in those days, the financial crisis will not happen.
In May 2006, Fortune Magazine published a report. The report discussed the possibility of a housing bubble in the United States. The report said, “The great housing bubble has finally started to deflate . . . In many, once sizzling markets around the country, accounts of dropping list prices have replaced tales of waiting lists for unbuilt condos and bidding wars over humdrum three-bedroom colonials.”
The real estate bubble triggered the financial crisis that hit the United States. The rest of the world was also affected. It appears that the U.S. government and the real estate industry experts did not know how to access and use Big Data. They could have accurately assessed the real estate market. That could have prevented the housing bubble from happening.
Big Data had already been in existence then. But it did not impact the real estate industry so much because they did not know how to use it. In other words, they did not appreciate Big Data at that time. Therefore, they did not use it to change the coming tide of recession. Big Data was not used effectively to stave off the financial crisis.
The real estate bubble in the United States triggered the 2008 financial crisis in part. There was a drastic fall in trade in investment all over the world. A slow growth for a long period of time followed. The effect was more on the debt-ridden countries.
In the financial crisis of 2007 to 2008, one thing became clear. We should keep the real estate industry healthy. It can impact the economy of the country. This industry should use all the tools and instruments it needs to stay robust and healthy. Unfortunately, it didn’t play a big part to prevent the financial crisis of 2007 to 2008 from happening.
Big Data plays an important role in the real estate industry. This is the belief of Prof. Carles Vergara of IESE Business School. “The intelligent use of big data is critical for real estate professionals and developers, as well as financial institutions and policymakers," says Prof. Vergara.
Real estate industry experts can also use Big Data to predict the next real estate market crash. A recent study conducted by Pedro Saffi of the University of Cambridge showed that the amount of investors’ REIT short-selling activity in the stock markets can indicate a housing crash. That’s how Big Data can be used to benefit the real estate industry.