We are going to step away from Fast data for this assignment. We are interested in being able to predict the price of a home using regression on available data. More specifically, we are interested in knowing how much value having a fireplace adds to the price of a home.

Background:

The website Zillow recently sponsored a contest with a prize over $1 million to whoever could come up with a method that would reliably predict the selling price of a home in the United States. Zillow was using a method based on regression in which many variables were used to develop an equation predicting the actual selling price of homes listed on the site. The old method was producing median estimates that were consistently within 5% of the actual selling price, but Zillow customers were not satisfied. Get more information on the “Zestimates”.

In this assignment, we are going to simplify the Zillow problem by focusing on a relatively small geographic area in Saratoga County, New York and on a small group of variables. The data in the M3 Data file is actual data gathered from public records a few years ago.

In 2007, the National Association of Realtors said their survey showed that home buyers were willing to pay about $1,220 more for a house with a fireplace but having a fireplace could boost the value of a home by $12,000 in some locations. In 2016, an Angie’s list survey found that having a fireplace could add about 12% to the selling price of a home.

To get started, start Excel. Download the Excel workbook "M3 Data" below. Immediately save the workbook with a new name. Use your name and include the assignment name, e.g. LastName_FirstName_M3 Data. This will ensure you have a good copy in case you make mistakes. (It will also make your instructor happy when grading your work, which is a good thing).

Please note: there is an additional written report required for this week's assignment. Pay particular attention to the instructions for your report in Task 7.

You will need to submit both your Excel file and your written report as a Word document.

bullet Task 1: Run a two tail, two-sample t-test for means to determine if the difference in Home Price for homes with a fireplace and those without a fireplace is statistically significant.

bullet Task 1.1: Using that information, how much does having a fireplace change the value of a home?

bullet Task 1.2: How do your results compare to the surveys discussed above? What could explain why your "fireplace value" is different than the values reported in the surveys?