Hedge funds increasingly need validated data for modern investment strategies

Posted on Feb 4 2019
Type Blog

Real estate investors have identified a strong duality within the industry. U.S. real estate has the potential to be one of the most valuable assets on the market, however, as far as tech-savvy investing goes, it’s also a particularly antiquated market. Our very own Chris Schaum spoke to this contrast at BattleFin, a conference that connects data providers to investment professionals who are looking to integrate unique or powerful data sets into their decision-making process.

Schaum argued the real estate market will see one of the greatest opportunities for investing in the next couple years. It’s especially important now, compared to years prior, for active investors to understand the U.S. real estate industry on a micro and macro-scale.

Leverage property-level data to determine the true value of an asset

On a granular level, the white-hot housing market that’s seen considerable growth since 2013 is now starting to cool. BuildFax has even seen a dip for two consecutive months in the pace of new construction and existing housing maintenance across the U.S.

With these large-scale trends affecting the housing stock, it’s important for real estate investors to understand the underlying value of their assets. Leveraging external tools for home price estimation is not enough. Instead, investors should focus their energies integrating external data sets that delve into a structure’s true risks, for instance, roof age, major systems, and property addition. This not only provides investors with a clear picture of a structure’s value, but it allows them to evaluate properties at scale, driving insights into an entire book of business.

Economic health sees impact from the housing sector

The impact of these recent housing trends isn’t relegated to real estate investment professionals. The macroeconomic effects of shifting housing activity also are also likely to impact hedge funds and investment professionals in other industries. Certain housing metrics, on a nationalized basis, provide deep insight into the U.S.’s economic health.

Remodeling is one of the leading indicators of consumer confidence – consumers don’t embark on large home projects if they fear instability in the market. Identifying this quantifiable hesitance in the market enables investors to make trading decisions accordingly. Additionally, recent BuildFax research shows single-family housing authorizations are one of the leading indicators of historical recessions between 1961 and 2008. While a recession is not on the horizon, these estimates allow investors to glean deeper understanding into trends that may move markets.

It is particularly useful to look at the effects of remodeling and single-family housing authorizations in parallel. Single-family housing authorizations are indeed a telling indicator of a future recession, however, a shift in recent years sees increased remodeling activity compared to new construction. This suggests remodeling may play an even bigger role in identifying the early stages of the next recession.

With BuildFax’s verified, timely data at their fingertips, hedge funds have the context they need to confidently invest in a shifting market, regardless of government shutdown-driven delays to new construction reporting. BuildFax’s database of over 23 billion data points takes the guesswork out of property history and condition data and provides high quality insights into one of the largest asset classes, valued at more than $70 trillion globally.

For more information on how BuildFax property history and condition insights can help elevate your investment strategy, contact us today.

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