Dewi Gotcash
October
16, 2012
Econ
4811-001
Professor
Ramirez
https://www.youtube.com/watch?v=p2q9ML4iknE
Micropaper 1
I
am a 45 year old man with a family of 4 (including me) interested in buying a
house in Denver, Colorado. Based on the data that I have collected from 7 other
cities I can find the averages for 10 important variables to me and my family.
Afterwards I can run a multivariate regression to determine the appropriate
offer for a house in Denver.
The averages of each value are in the data
printout.
Here’s what the regression of these
variables looks like using the average house value from the 7 cities of Baltimore,
Boston, Houston, Miami-Hialeah, Minneapolis, Tampa, and Washington DC. I will
substitute the needs of our family over the averages in those instances deemed
necessary.
Home Value = Constant +B1(X1) + B2(X2) +
B3(X3) + B4(X4) + B5(X5) + B6(X6) +B7(X7) + B8(X8) + B9(X9) + B10(X10)
Running the regression, we can come up
with these positive or negative coefficients multiplied by the variable numbers
that best fit our family. Sometimes the average will also be used as this
indicates the most common choice within this variable.
Home Value = 3639401 + 136154.5(2)_X1 +
-26937.3(3)_X2 + 32.7(2400)_X3 + -2086.7(2007)_X4 +10704.2(9)_X5 +
18038.2(9)_X6 + 59974.7(7)_X7 + 10.8(45)_X8 + -3(5000)_X9 + -48880.8(1) =
$336,481.8
Based off this regression I could make an
offer on a House with 2 baths, 3 bedrooms, 2400 sq ft, built in 2007, rating of
unit as a place to live at 9 of 10, rating of neighborhood at 9 of 10, 7 rooms,
My head of household age at 45, 5000 for a Metropolitan statistical area, and 1
dining room. With the regression using these values I come up with $336,481.8.
I will offer $336,000
Looking at the Realtor Add in the paper
for 249,000, I will use the coefficients and values to see if I come up with a
higher value, or a lower value than what the advertisement posted.
Home Value = 3639401 + 136154.5(3)Bath +
-26937.3(3)Bedrooms + 32.7(3645)square foot of unit + -2086.7(2006)year built +
10704.2(9)rating of unit as a place to live(0 least desirable, 10 most
desirable) + 18038.2(9)rating of neighborhood as a place to live(0 least
desirable, 10 most desirable) + 59974.7(7)# of total rooms +10.8(45)Head of household
age + -3(5000)Metropolitan Statistical Area +-48880.8(1)# of Dining Rooms =
$515,433.60
The home advertisement is for $249,900.00.
I will make an offer at their price of $249,900 because I know from running the
regression that I should be paying $515,433.60 with all the variables.
mean hhage baths bedrms dining built
unitsf howh hown value rooms
Mean estimation Number of obs =
8092
--------------------------------------------------------------
| Mean
Std. Err. [95% Conf. Interval]
-------------+------------------------------------------------
hhage | 51.83848 .1725826
51.50018 52.17679
baths | 1.948838 .0085862
1.932007 1.96567
bedrms | 3.169179 .0107863
3.148035 3.190323
dining | .6506426 .0056707
.6395266 .6617586
built |
1970.82 .2664935 1970.298 1971.343
unitsf | 2376.438 24.05377
2329.287 2423.59
howh | 8.462185 .0161768
8.430474 8.493896
hown | 8.188211 .0180472
8.152833 8.223588
value | 376857.3 4775.262
367496.5 386218
rooms | 6.667696 .0205456
6.627422 6.707971
--------------------------------------------------------------
. mean smsa rooms
Mean estimation Number of obs = 8092
--------------------------------------------------------------
| Mean
Std. Err. [95% Conf. Interval]
-------------+------------------------------------------------
smsa | 4888.997 32.18385
4825.908 4952.085
rooms | 6.667696 .0205456
6.627422 6.707971
--------------------------------------------------------------
. summarize baths bedrms unitsf built howh
hown rooms value hhage smsa dining
Variable | Obs Mean
Std. Dev. Min Max
-------------+--------------------------------------------------------
baths | 8092 1.948838
.7723771 0 8
bedrms | 8092 3.169179
.9702912 0 9
unitsf | 8092 2376.438
2163.77 99 18083
built | 8092 1970.82
23.97256 1919 2007
howh | 8092 8.462185
1.455194 1
10
-------------+--------------------------------------------------------
hown | 8092 8.188211
1.623442 0 10
rooms | 8092 6.667696
1.848195 1 21
value | 8092 376857.3
429561.3 1 4252666
hhage | 8092 51.83848
15.52476 15 94
smsa | 8092 4888.997
2895.115 720 8840
-------------+--------------------------------------------------------
dining | 8092 .6506426
.5101087 0 4
. regress value baths bedrms unitsf built
howh hown rooms hhage smsa dining
Source | SS df
MS Number of obs
= 8092
-------------+------------------------------ F( 10, 8081) =
252.29
Model | 3.5521e+14 10
3.5521e+13 Prob >
F =
0.0000
Residual | 1.1378e+15 8081
1.4079e+11 R-squared =
0.2379
-------------+------------------------------ Adj R-squared = 0.2370
Total | 1.4930e+15 8091
1.8452e+11 Root MSE =
3.8e+05
------------------------------------------------------------------------------
value | Coef. Std. Err. t
P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
baths | 136154.5 7302.138
18.65 0.000 121840.4
150468.6
bedrms | -26937.32 7716.246
-3.49 0.000 -42063.14
-11811.49
unitsf |
32.69899 2.200513 14.86
0.000 28.38542 37.01256
built | -2086.696 191.1321
-10.92 0.000 -2461.364
-1712.027
howh | 10704.18 3641.806
2.94 0.003 3565.298
17843.05
hown | 18038.21 3228.318
5.59 0.000 11709.87
24366.54
rooms | 59974.73 4800.902
12.49 0.000 50563.73
69385.74
hhage | 10.78604 279.178
0.04 0.969 -536.4748
558.0469
smsa | -2.997034 1.483128
-2.02 0.043 -5.904346
-.089722
dining | -48880.8 10279.98
-4.75 0.000 -69032.22
-28729.39
_cons | 3639401 374526.6
9.72 0.000 2905233 4373570
------------------------------------------------------------------------------
. regress value baths unitsf howh hown
rooms hhage
Source | SS df
MS Number of obs
= 8092
-------------+------------------------------ F(
6, 8085) = 387.79
Model | 3.3364e+14 6
5.5607e+13 Prob >
F =
0.0000
Residual | 1.1593e+15 8085
1.4339e+11 R-squared =
0.2235
-------------+------------------------------ Adj R-squared = 0.2229
Total | 1.4930e+15 8091
1.8452e+11 Root MSE =
3.8e+05
------------------------------------------------------------------------------
value | Coef. Std. Err. t
P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
baths | 107371.7 6804.417
15.78 0.000 94033.33
120710.2
unitsf | 32.90371 2.218101
14.83 0.000 28.55566
37.25176
howh | 8042.623 3667
2.19 0.028 854.3578
15230.89
hown | 17392.48 3256.737
5.34 0.000 11008.43
23776.52
rooms | 46430 2869.049
16.18 0.000 40805.93
52054.08
hhage | 478.8533 277.4092
1.73 0.084 -64.94007
1022.647
_cons | -455462.2 30886.04
-14.75 0.000 -516006.8
-394917.6
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