Data Driven Decision Making – Case Study 4

Clark SOM

Condo Confusion
By Alex Nicholson
Attached is the Dataset condo.xlsx containing all data and statistical calculations used
to formulate the following regression analysis.

May 25th, 2021

Background & Introduction
Oceanside condominiums have become increasingly popular purchases in recent decades, but the
price of the units can vary dramatically even within the same building. People have personal
preferences for the location of their individual unit given the benefits it could offer them. For
condominium owners it is important they can accurately predict a price evaluation for each unit
so that they can ensure that they are selling each unit for its true worth given its features. This
research uses data collected from a two-building condominium complex that contains 209 units,
106 of which were sold at auction. Using the data on the selling price that each of the sold units
was purchased at auction for allows for an estimation of all other condominiums by examining
the location factors that may determine fluctuations and differences in price of each
condominium unit. There are many factors that may influence price at this specific complex
starting with what floor the condo is on. There are benefits to the accessibility of the lower floors
but also, they are less private. Similarly, to the floor another factor is distance from the elevator
that both has the benefits of accessibility along with concerns about privacy. Another
condominium price determinant that is especially important for oceanside properties is the view
that each individual unit, whether it’s a direct shot of the water or the parking lot can make a
massive difference to a buyer. For this specific complex there is second element to the view that
is whether or not the condo is on an end and therefore may have a reduced view of the ocean.
Lastly this complex includes some units that were sold furnished while some are unfurnished,
furniture can be expensive so this may be a bonus while other buyers might value the opportunity
to use their own interior decorating skills. As outlined, there are numerous factors that contribute
to the different sale price of each condominium unit especially at complexes like the one studied
here that is specially oceanside.
The Problem
This condominium complex is very unique. The single elevator at one end of one building
presents a remarkably high level of both inconvenience and privacy from people in top floor
units in building 2. Due to this and the other differentiating factors between each unit it is
reasonable for the developer to be unsure of how the floor of the unit, the distance from the
elevator, the presence or absence of an ocean view, the openness of the view, and finally the
level of furnishing affects each units sale price. To answer this question of which of the variables
statistically impacts condo price and the extent of those impacts we must make a predictive
model based on based units sold at auction.
Methodology
Using the data on the past 106 units sold at auction and the features they have a predictive
regression model can be created to estimate future sold units selling price.
The Regression Model will follow this format:
Sale Price  = β 0  +  β 1Floor +  β 2 Distance+  β 3 View + β 4 End + β 5Furnish

Regression Results
 SUMMARY OUTPUT

Regression Statistics
0.8401153
Multiple R 4
0.7057937
R Square 9
Adjusted R 0.6910834
Square 8
9.9045840
Standard Error 4
Observations 106

ANOVA
Significanc
  df SS MS F eF
Regression 5 23534.1479 4706.82958 47.9795302 4.4855E-25
Residual 100 9810.07851 98.1007851
Total 105 33344.2264      

Coefficient Standard Lower

  s Error t Stat P-value Lower 95% Upper 95% 95.0%
177.70348
Intercept 5 4.1684197 42.6309005 5.9798E-66 169.43346 185.973511 169.43346 1
Floor -0.7151434 0.53076602 -1.3473797 0.18090299 -1.768168 0.3378813 -1.768168
Distance -0.8732525 0.24494572 -3.5650858 0.00055966 -1.3592178 -0.3872872 -1.3592178 -
31.272846
View 8 2.23120852 14.0161023 2.457E-25 26.8461927 35.699501 26.8461927
End -17.807815 3.98195169 -4.4721324 2.0497E-05 -25.707894 -9.9077366 -25.707894 -
9.9837621
Furnish 9 2.05149864 4.86657021 4.2438E-06 5.91364731 14.0538771 5.91364731 1

The regression model equation with calculated coefficient is as follows:

Sale Price  = 177.703   - 0.715(Floor ) -  0.873( Distance ) +  31.273(View)- 17.808(End) +
9.984 ¿ Furnish)

Data Analysis
I was unsurprised by the direction and magnitude of all of the coefficients in equation, they all
aligned with my assumptions. For each floor higher the condo the price will decrease by $71.50,
meaning that the lower floors are more desirable. For each one unit increase in distance from the
elevator the sale price will decrease by $87.32, this means that being nearer the elevator is
preferable. If the condo has an ocean view it will experience a $3,127.28 increase in sale price,
the ocean view has an extremely large positive relationship with sale price. If the specific unit
has a restricted end view then sale price will decrease by $1,780.78, people are willing to pay
less if the view is restricted. If the condo is already furnished the sale price of the condo is
expected to increase by $998.38, people value not having to provide their own furniture for the
condo.
Once we identify the magnitude and direction of the coefficients it is important to check for
statistical significance. Distance, View, End, and Furnish all have really high T statistics and low
p values resulting in sufficient evidence to confirm that changes in these variables are
statistically significant in determining differences in sale price. The variable for Floor is not
statistically significant due to its lower T statistic and its P-value being > 0.05.
Individual T statistics for significance of each Independent Variable on Condo Price (Y)

Independant Variables T Statisti cs

20

15
14.0161022793561

10

5
4.86657021149938

0 -1.34737971101414

-3.56508576725055
-4.47213242833523
-5

-10
Floor Distance View End Furnish

- The most influential factor in determining condo sale price at this oceanside complex
is whether or not the unit has an ocean view.
- The R squared tells us that 70% of the variance in condo sales price can be
accounted for by this model.