AI is making houses more expensive

Artificial intelligence has set up camp in the housing market, affecting everything from listings to house hunting to prices. While the technology has been helpful in some cases, many worry that AI will cause more problems than it solves.

Artificially expensive

In today’s economy, the potential for home ownership is “slipping out of reach for most Americans,” said Slate. Searching for a place to live “now comes with more stressors. And we can thank the overzealous adoption of AI for that.”

AI can lead to higher prices for houses and rentals; for example, the rapid growth of AI companies in San Francisco has fostered a “heated competition among techies and non-techies to pounce on listings,” said The New York Times. San Francisco’s rents have risen by an average of 6% in the past year, which is “more than double the 2.5% increase in New York City.” As a result, the average rent for a San Francisco apartment is $3,315 a month, “right behind New York City’s $3,360, which is the nation’s highest.”

The rise of AI is also “fueling a frenzy of data centers that are competing with residential homes for capital, power, water and even sonic space,” said Realtor.com. This has led to a “housing market stuck in neutral, with the potential for higher bills on the horizon, and neighborhoods kept awake by the hum of chillers designed to keep machines — not people — cool.” AI data centers and other infrastructure costs “hundreds of billions of dollars of capital each quarter,” Jason Thomas, the head of global research at Carlyle, said in a research note titled “Let Them Eat Compute.” With this, the “issue is not whether high rates are ‘crowding out’ interest-sensitive sectors like for-sale housing. Clearly, they are.”

Succumb to the slop

Along with making homes more expensive, the prevalence of AI slop all over internet listings is making homebuying more difficult. Often listings feature AI-generated images or have used AI tools to do things like “remove power lines, add trees or replace grass with a pool,” Kevin Greene, the general manager of real estate solutions for the data solutions company Cotality, said to Slate. While edited photos and staging are common practice in real estate, these “AI-ified creations are causing clients and professionals to ask themselves if this is a straight-up deceptive practice,” Slate said.

Still, some clients find that the use of AI has benefited their homebuying experience. AI can offer real estate insights and refine searches “in a way that cuts down on the time and clutter that can very quickly consume a hunt for a new home,” Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, said to Newsweek. AI will “narrow the information gap between buyers and markets, making for a more efficient process,” Hannah Jones, the senior economic research analyst for Realtor.com, told the outlet. “However, relying too heavily on AI can result in feedback loops that could amplify error or bias.”

The incorporation of AI into the process of finding homes additionally poses a “challenge for realtors who have often prided themselves on making more personalized options for their clients,” Beene said. The “simplicity of feeding all your housing desires into AI prompts can be seen as vastly more efficient.”