ECONOMETRICS

PROJECT

“Analysing the various factors

affecting the Pricing of Houses”

Submitted By:
Ayush Bidhuri 1339
Dakshi Kumar 1287
Sugandh 1211
Introduction
This paper aims to analyze the factors affecting the prices of
housing in a country.The housing market is a crucial
component of the economy, and fluctuations in house prices
can have significant impacts on households, businesses, and
policymakers.
Understanding the factors that influence house prices is
essential for making informed decisions regarding investment,
lending, and public policy. Additionally, owning a home is often
the largest financial asset for most households, and changes in
house prices can have significant implications for homeowners'
wealth and well-being.
The data for our analysis has been outsourced from Kaggle,
showing the price of houses in USA from early 90’s to 2000’s.
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 Literature Review
● There has been varied research conducted around the world which shows that location as
well as property specific factors including size, age, condition,square feet etc have
significant impact on the price of the houses.
● "An Empirical Analysis of the Factors Affecting Housing Prices in Turkey" by Ece Güner
and Murat Çokgezen: This paper analyzes the factors that affect housing prices in Turkey
using a regression model. The study finds that factors such as location, house size, and
age of the building have a significant impact on housing prices.
● "Factors Affecting Housing Prices in the United States: A Literature Review" by Anindita
Chakrabarti and R. R. Kabra: This paper provides a comprehensive review of the
literature on factors that affect housing prices in the United States. The study identifies
several factors such as location, house size, and interest rates that have a significant
impact on housing prices.
● A Study of Factors Affecting Housing Prices in India" by Rupesh Kumar and Anupam
Rastogi: This paper analyzes the factors that affect housing prices in India using a
regression model. The study finds that factors such as location, house size, and
proximity to amenities have a significant impact on housing prices
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DATA SET

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 Regression Analysis:

In order to determine the effect of various factors on housing, a

multiple linear regression model was chosen as follows:
Y=𝛃0+𝛃1x1+𝛃2x2+𝛃3x3+𝛃4x4+𝛃5x5+𝛃6x6+𝛃7x7+𝛃b8x8+Ɛ
where : Y is the dependent variable( the pierce of houses)
X1 is the number of bedrooms
X2 is the number of bathrooms
X3 is the square feet living
X4 is the the square feet lot
X5 is the total floors
X6 is the waterfront
X7 is the view
X8 is the condition
Ɛ is the error term
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Results and Interpretation
Summary Output

1. The independent variables in the model explain

82.7% of the variation in the dependent variable,
which is house pricing. This is a relatively high
percentage and suggests that the model is a good
fit for the data.
2. The adjusted R-squared value of 0.761192
suggests that the model is relatively stable and can
be used to make predictions about future house
prices. The adjusted R-squared value takes into
account the number of independent variables in the
model, and a higher value indicates that the model
is less likely to overfit the data.

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These are the estimated values of slope and
intercept terms. P and T test has also been
conducted which shows that they are statistically
significant.

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ANOVA TABLE

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VIOLATIONS OF CLRM
● Linear Model- The regression model is linear in parameters.

● No MultiCollinearity and AutoCorrelation exists- The variation inflation factor is

10.3 , Hence, No MultiCollinearity exists.The absence of multicollinearity
and autocorrelation suggests that the independent variables are not highly
correlated with each other and that there is no significant relationship
between the residuals of the model. This means that the model can be
relied upon to provide accurate estimates of the coefficients for each
independent variable.

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Limitations
● Various other factors including population density, government
policies,interest rates,employment level etc also affect the prices of
housing which have not been taken into consideration while conducting
this research.
● Limited generalizability: Studies on house pricing factors may not be
generalizable to all types of homes or markets, as different markets and
different types of homes have varying conditions that can impact pricing.
● Inaccurate data: The study may be limited by the accuracy of the data
collected. Data sources like survey responses and public records are
prone to errors and inconsistencies, and this can affect the reliability of
the results.
● Rational Consumer: This study is based on the assumption that the
consumer is rational and is able to make the right choices however it
may not be true in all scenarios.

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Scope For Further Research
1. The impact of housing policy: Research could examine how different housing
policies, such as rent control and zoning regulations, affect the pricing of houses.
This could help policymakers determine the best strategies for addressing
housing affordability and availability issues.
2. The impact of environmental factors: Further research could investigate the
impact of environmental factors, such as climate change, natural disasters, and
air quality, on housing prices. This could help homeowners and policymakers
understand how to prepare for and respond to these risks.
3. The impact of new technology: Research could examine how new
technologies, such as smart homes and renewable energy systems, affect
housing prices. This could help homeowners and builders understand the
potential benefits and drawbacks of investing in these technologies.

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Conclusion

The regression analysis conducted checks average price of house

on various parameters like number of bedrooms,bathroom,living
conditions,view and many more .the research provides valuable
insights into the factors that affect the pricing of houses.
The model used in the research has a high R-squared value,
indicating a good fit, and the absence of multicollinearity and
autocorrelation suggests that the model is reliable.
It is found that all the slope and intercept terms are statistically
significant and doesn’t violate Classical regression model.
The research suggests that the independent variables used in the model
have a significant impact on house pricing..

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REFERENCES
● The data is used in the project is a secondary data and collected from
https://www.kaggle.com/datasets/shree1992/housedata

● https://www.researchgate.net/publication/301301295_Determining_Factors_Affecting_H
ousing_Prices_in_Turkey_with_Hedonic_Pricing_Model

● https://www.sciencedirect.com/science/article/pii/S1877050922001922

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