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Housing Price Prediction Model Analysis

The document presents a housing price prediction model for D.M. Pan National Real Estate Company, highlighting key statistics such as an average listing price of $326,947 and a strong positive correlation (r = 0.96) between square footage and listing price. The regression equation indicates that for every additional square foot, the price increases by approximately $148.80, and about 92.19% of price changes can be explained by the size of the home. The model is most reliable for homes between 1,100 and 3,000 square feet, beyond which predictions may be less accurate.

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26 views3 pages

Housing Price Prediction Model Analysis

The document presents a housing price prediction model for D.M. Pan National Real Estate Company, highlighting key statistics such as an average listing price of $326,947 and a strong positive correlation (r = 0.96) between square footage and listing price. The regression equation indicates that for every additional square foot, the price increases by approximately $148.80, and about 92.19% of price changes can be explained by the size of the home. The model is most reliable for homes between 1,100 and 3,000 square feet, beyond which predictions may be less accurate.

Uploaded by

lfallon0423
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

1

Housing Price Prediction Model for D.M. Pan National Real Estate Company

Department of Math, Southern New Hampshire University

MAT 240: Applied Statistics


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Housing Price Prediction Model for D.M. Pan National Real Estate Company

Module Two Notes

The average listing price in my sample was $326,947, the median was $297,850, and the

standard deviation was $118391.7248. For square footage, the average was 1,859 sq ft, the

median was 1,742 sq ft, and the standard deviation was 763.9416 sq ft.

Regression Equation

My regression equation is: y=148.8x + 50304

Determine r

The correlation coefficient (r) shows both the strength and direction of the relationship

between two variables. In this case, the coefficient of determination (r²) is 0.9219, which means

the correlation coefficient (r) is about 0.96 after taking the square root. Since r falls between 0.8

and 1, that tells us there’s a strong relationship between the variables. The positive value of r also

means the slope goes upward from left to right, pointing to a positive correlation—basically, as

one variable increases, so does the other. So, if X goes up, Y goes up too. In simpler terms,

there’s a positive relationship between the square footage of a property and its list price, the more

space, the higher the price.

Examine the Slope and Intercepts

On average, the price of a home goes up with every additional square foot. Based on the

slope of the line, the price increases by about $148.80 per square foot. The intercept is 50,304,

but since there weren’t any land-only listings in the area I looked at, there’s no data for homes

with square footage close to zero—so the intercept doesn’t really have a meaningful

interpretation in this case.


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R-squared Coefficient

R-squared (r²) basically tells us how well the line from the regression fits the data. In this

case, the R-squared value is 0.9219, which means about 92.19% of the changes in listing prices

can be explained by the size of the home. That’s a pretty strong connection, showing that square

footage plays a big role in how much a home is listed for. The other 7.81% is likely due to things

the model doesn’t include—like location, condition, or upgrades.

Conclusions

Based on the data I pulled; there’s a clear and strong positive relationship between square

footage and listing price—bigger homes tend to come with higher price tags. The average home

in my sample was about 1,859 square feet, which seems a bit smaller compared to the national

summary data (2,111 square feet). So, homes in this region might be a bit more modest in size

overall.

Using the slope from my regression equation, which is $148.80, we can say that for every

additional 100 square feet, the price increases by about $14,880. That gives a pretty good idea of

how size impacts price in this area—small changes in square footage can mean big shifts in

price.

As for where the regression model is most reliable, I’d say the graph is best used within

the typical range of homes in the dataset—probably somewhere between 1,100 and 3,000 square

feet. That’s where we have data, and where the relationship between size and price holds up the

best. Beyond that range, things could get less predictable, especially with luxury homes or very

small properties that weren’t represented in the sample.

Common questions

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A strong and positive correlation coefficient, such as 0.96, indicates that square footage is a reliable predictor of listing prices, which can guide real estate investment strategies. Investors might prioritize acquiring larger properties, anticipating higher returns as price grows with size, providing a quantitative basis for evaluating potential investments and market strategies .

Applying the regression model outside the specified range of 1,100 to 3,000 square feet introduces limitations due to the lack of data for very small or luxury properties, making predictions less reliable. Factors such as unique characteristics of luxury homes or different scaling effects in small properties that weren't represented in the sample can further reduce the model's accuracy and reliability extrapolated beyond this range .

Potential external factors include the property's location, condition, neighborhood desirability, school district quality, local amenities, and economic trends. These factors are not included in the regression model focusing solely on square footage, yet they can significantly influence housing prices, contributing to the 7.81% unexplained variance in the model's predictions .

Regional differences in the housing market could significantly affect the applicability of the regression model. Factors such as local economic conditions, cultural preferences for home size, availability of land, and population density can influence both average home sizes and pricing structures, potentially leading to disparities in how well the model predicts prices in different areas beyond the sampled region .

The average square footage of homes in the dataset is 1,859 sq ft, which is smaller than the national average of 2,111 sq ft. This suggests that the region studied might consist of more modestly sized homes, potentially reflecting local housing trends, land availability, or economic factors that influence the typical home size relative to national statistics .

The correlation coefficient "r" indicates both the strength and direction of the relationship between square footage and listing price. With an "r" value of approximately 0.96, there is a strong positive relationship, meaning as square footage increases, so does the price. This correlation shows that listing prices are heavily dependent on the size of the home .

The intercept of the regression equation, which is 50,304, lacks practical significance because there were no data points for homes with square footage close to zero in the dataset. Therefore, the intercept does not reflect a realistic scenario or provide meaningful information about homes in this context. In essence, it merely serves as a mathematical artifact of the regression line .

The slope of the regression equation, which is $148.80 per square foot, informs potential buyers that for every additional square foot added to the home, the price is expected to increase by $148.80. This provides a quantitative measure of how much buyers can expect to pay for increases in home size and highlights the linear relationship between square footage and price in the dataset .

The regression model highlights that square footage is a significant determinant of housing prices, with an R-squared of 0.9219 indicating a strong correlation. The model implies that increasing a home's square footage typically results in a proportional increase in its listing price, affirming square footage as a critical component in property valuation .

The R-squared value of 0.9219 indicates that approximately 92.19% of the variability in listing prices can be explained by the square footage of the homes. This suggests a strong dependency of price on size. However, 7.81% of the variance is not explained by this model, which could be due to factors like location, condition, or upgrades that were not included in the model .

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