Estimating House Price

Preliminary analysis report

Xianghui Dong

Can you estimate house price?NO

Different type of buyersDifferent valuation and preferenceSmall pool of serious buyerTiming

YESAt least an rangeExperienced Realtor can

Zestimate®Industry leading metric performance:

Within 20% of sale price in 79.7% of time

Zestimate® formulaPhysical attributes

Tax assessments

Prior and current transactions

data on 110 million homes

(March 2013)

Really all about 3 things Location

Education – school districtTransportation – distance to major sitesCommunity

House itselfSize, design, condition…

TimingMarket trendTiming for seller and buyer

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

Start from my local area

FocusTop priority: School district

All great school districtsSuburbs

Price range: 400k ~ 700kAssumption:

Potential buyers are similar and comparable

Recent Sales Data

Property Data for each sale

One data that rule them all

Assessment on property value every 3 yearssales approachcost approachland + improvement + adjustment

Not so perfect reality

Market Value Index

3 years period

My first formulaSale price =

Base (Tax assessment) * Timing index

Intrinsic value adjusted by market trendTax assessment have them already:

Location, land, Sqft, bedrooms, conditions Comparable sales

Use more up to date comparable sales to adjust

Define “comparable”Sales in same areaPrevious 40 daysTax assessment within 15%

difference60k ~ 100k for 400k ~ 700k

More complex conditions didn’t improve

Moving average of timing indexTiming index = sale price / tax assessmentSimple moving average for comparable

salesLimit 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

20854, Potomac, MDSuburb and great school district

20850, Rockville, MDCity and good transportation

46077, Zionsville, Indiana

Estimation error for PotomacMean = 0.005710863sd = 0.1124423

Estimation error for Rockville

Estimation error for Zionsville

Need lots of improvement

The error is still too bigFollow the trend, not prediction

Compare to ZestimateMore data