analysis project

1. Preliminary analysis report
Xianghui Dong

2. Can you estimate house price?
 NO
 Different type of buyers
 Different valuation and preference
 Small pool of serious buyer
 Timing
 YES
 At least an range
 Experienced Realtor can

3. Zestimate®
 Industry leading metric performance:
Within 20% of sale price in 79.7% of time

4. Zestimate® formula
Physical attributes
Tax assessments
Prior and current transactions
data on 110 million homes (March 2013)

5. Really all about 3 things
 Location
 Education – school district
 Transportation – distance to major sites
 Community
 House itself
 Size, design, condition…
 Timing
 Market trend
 Timing for seller and buyer

6. Can we model it?
Available data
 Lots of macroscopic data:
 Economy, Mortgage rates…
 Local and property data
 Diverse data sources and formats
 Data quality problems
 Main API available

7. Start from my local area

8. Focus
 Top priority: School district
 All great school districts
 Suburbs
 Price range: 400k ~ 700k
 Assumption:
 Potential buyers are similar and comparable

9. Recent Sales Data

10. Property Data for each sale

11. One data that rule them all
 Assessment on property value every 3 years
 sales approach
 cost approach
 land + improvement + adjustment

12. Not so perfect reality
Market Value Index
3 years period

13. My first formula
Sale price =
Base (Tax assessment) * Timing index
 Intrinsic value adjusted by market trend
 Tax assessment have them already:
 Location, land, Sqft, bedrooms, conditions
 Comparable sales
 Use more up to date comparable sales to adjust

14. Define “comparable”
 Sales in same area
 Previous 40 days
 Tax assessment within 15% difference
 60k ~ 100k for 400k ~ 700k
 More complex conditions didn’t improve

15. Moving average of timing index
 Timing index = sale price / tax assessment
 Simple moving average for comparable sales
 Limit to 0.8 ~ 1.4
 Most are foreclosures, trustee auction, investment buyer
 Zillow exclude foreclosures too
 Half price
 Auctioned with loan amount 15 years ago
 Tear down and Rebuild
 Not comparable to regular buyer, not too many

16. 20854, Potomac, MD
 Suburb and great school district

17. 20850, Rockville, MD
 City and good transportation

18. 46077, Zionsville, Indiana

19. Estimation error for Potomac
 Mean = 0.005710863
 sd = 0.1124423

20. Estimation error for Rockville

21. Estimation error for Zionsville

22. Need lots of improvement
The error is still too big
Follow the trend, not prediction
Compare to Zestimate
More data