There is a new method…
CAPE Analytics – self-described as the leader in AI-powered geospatial property intelligence – has launched the CAPE Liquidity Score billed as an advanced, first-of-its-kind machine learning model used to predict property liquidity.
Stated simply: The aim of the new AI tool is to determine whether a property is likely to be sold faster or slower than other homes in its neighboring community and price range, without needing to discount the price, officials explained.
Amid a climate of increased interest rates, refinancing had dried up after a record-level activity over the last couple of years. Add to the mix a small inventory of housing stock, soaring property values up nearly 20% year-over-year and increased mortgage rates, with an average 30-year fixed loan now 5.7%, up from 3.29% at the beginning of 2022.
Sans a crystal ball, its uncertain when those dynamics might change for a return to a more “normal” marketplace. CAPE Liquidity Score aims to act as a risk assessment tool for loans and real estate transactions, company officials said.
Officials noted that despite the importance of liquidity in measuring property desirability and loan risk, there has yet to be a solution that is capable of both accurately and efficiently predicting the liquidity of a property. CAPE Liquidity Score addresses this solution by using machine learning, geospatial data, and high-resolution imagery to analyze more than 40 property attributes that are predictive of actual home sales activity, company officials said.
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Liquidity has long been a concept institutional real estate investors and loan originators have wanted to account for to better understand how a home might behave when it is placed on-market to be sold. However, due to a lack of understanding around the necessary details of a property, including its condition and geospatial factors, automated valuation models (AVMs), mortgage originators, and HELOC originators have been unable to harness this concept into a useful, usable data point that supports decision making.
Enter CAPE’s Liquidity Score, which is being described as the first model of its kind that can accurately predict how a given home will perform on the market, thereby allowing these parties to reduce errors in valuation, prepayment risk and default risk.
“While the real estate industry has always had some intuition into the concept of liquidity, it has lacked the ability to properly measure and predict it for a specified property,” Raj Dosaj, head of real estate at CAPE Analytics, said. “Predicting liquidity was previously impossible without adequate remote and recent property intelligence. CAPE’s underlying property attributes are predictive of liquidity, thereby introducing insight into home salability.”
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He noted how CAPE Liquidity Score provides investors in single-family real estate and mortgages with a direct method to assess the marketability of a property that serves as the basis for investment valuation and collateral risk unlike other measures on the market today – a critical input into determining the value of a home and a mortgage’s future likelihood of prepayment, default, and loss.
Announcement of the product launch comes on the heels of another launch, that of the AIRE platform that combines computer vision, aerial imagery, and proprietary data sources to extract critical information about properties, focusing on characteristics that influence their value and marketability.
“AI and machine learning are growing rapidly in mortgage, but in real estate in general,” Dosaj previously told Mortgage professional America in discussing the AIRE platform. Up to now, Dosaj noted, CAPE has focused on designing platforms for the insurance industry. The challenge when first targeting that industry some six years ago was: “How can we help insurance carriers price their insurance policies better by giving them better information on a property?” Dosaj asked rhetorically.
CAPE Analytics provides instant property intelligence for buildings across the US and Canada, enabling residential and commercial property stakeholders to access valuable property attributes instantly, with the accuracy and detail that typically requires an on-site inspection, but with unparalleled immediacy and global scale, according to company literature. Founded in 2014, CAPE Analytics is backed by leading venture capital firms and insurers comprising machine learning, data infrastructure, and property risk experts.
