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Team C Final Paper University of Phoenix Research and Evaluation I RES 341

Team C Research Team C Data Collection Paper Introduction The purpose of our research is to examine factors that impact the price of homes. The problem statement is to examine the relationship between distance from the center of the city and the price of homes. The research question our team is trying

to answer is; will the data reveal a significant difference in price for houses less than 15 miles from the center of the city (Group 1) and those houses equal to or greater than 15 miles from the center of the city (Group 2)? The mean home prices in Group 1 are denoted H1 and mean home prices in Group 2 are denoted H2.

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Null Hypothesis: There is no statistically significant difference in the mean of Home Prices Group 1 and the mean of Home Prices Group 2. Ho: H1 = H2

2.

Alternate Hypothesis: There is a statistically significant difference in the mean of Home Prices Group 1 and the mean of Home Prices Group 2. H1: H1 H2 Variables and Possible Outcomes The variables tested in this hypothesis are mean prices in Groups 1 and 2. The

52 prices in Group 1 range from 147.4 minimum to 345.3 maximum and have a mean of 232.0. The 53 prices in Group 2 range from 125 minimum to 327.2 maximum and have a mean of 210.4. Three possible outcomes of the research: 1. The mean of Group 1 is significantly less than the mean of Group 2.

Team C Research 2. The mean of Group 1 is significantly greater than the mean of Group 2. 3. The mean of Group 1 is or equal to the mean of Group 2. Review of Articles Article one, Impact of the Real Median Price of Single-Family Homes on Geographic Mobility.(Cebula, 2007) This article examines the effect of home price to the migration rate to that geographic area. The author was able to determine that based on the real median price of a home that in-migration was a decreasing function comparatively. In-relating to our research project the author of this article was trying to

find if home prices effected migration. In comparison our own research is to determine if distance from the center of a city effects home prices. The reason for selecting this article for our research was to show that though distance could affect pricing, it could also be affecting migration rate as well. Article two, Price Discovery Between Residential Land & Housing Markets.(Ooi & Lee, 2006) The goal of the authors is to determine if the price of land and the price of housing are directly correlated or not. They hope to determine one of two outcomes, the first outcome being that the price of housing is directly affected by the price of land, and the second outcome being that the price of land would be directly affected by the price of housing. Through the authors research, they were able to determine that: (1) house and land prices are co-integrated, meaning that they are related to each other in the long-term; and (2) housing price changes lead land price change but not the reverse.(Ooi & Lee, 2006) In comparing this with our research study, if our results determined that home prices decreased as a result of being farther from the city or viceversa, it could be inferred that land prices would follow the home price trend as well.

Team C Research This article was chosen to show that land-prices and home-prices coincide and could also be affected by distances from the center of the city. Article three, Housing Price Gradients in a Region with One Dominating Center.(Osland, Thorsen &Gitlesen, 2007). In this research study, the authors are

trying to determine if spatial variation has an affect on the housing pricing from a city. To conduct the research they chose an island of Norway because of the ideal infrastructure. Only the main city exists on the island making it ideal to research since there would be no other cities to affect the pricing gradient. The research concluded that as travel time from the city increases housing prices decrease accordingly. This study would support our alternate hypotheses of a statistically significant difference in the mean of home prices of Group 1 and Group 2. The author has the same goals in mind as our research team, and that is to either prove or disprove that distance from a city affects home pricing. Article four, Empirical Modeling of the Relative Impacts of Various Sizes of Shopping Centers on the Values of Surrounding Residential Properties.(Sirpal, 1994) The goal of the author is to determine the location of residential housing from a shopping center (as well as the size of a shopping center) that will affect overall value of the home. The author concludes that the home closer in distance to larger shopping centers have a greater value than those near smaller shopping centers. Relating this to our own research this would comparatively support our alternate hypothesis. Though the model may be different from what our team is using, the same basic goal exists, which is to determine if there is a difference in pricing as distance increases.

Team C Research Sampling design The population of the sample is defined as 52 prices within Group 1 and the 53 prices within in Group 2. To establish consistency within our research we will use all 52 prices from Group 1 and all 53 prices from Group 2. The research will use a stratified sample. A stratified sample is applicable when the population can be divided into relatively homogeneous subgroups of known size (called strata). Within each stratum, a simple random sample of the desired size could be taken. (Doane, Seward 2007) The n of Group 1 is all prices within this group of 52, with a mean price of the group of 232.0. The n of group 2 is all prices within this group of 53, with a mean price of the group of 210.4. The possible bias that could come into play is if a random sample from Group 1

and Group 2 instead of using the entire data in each group. If the random sample chose a house in the middle of list 1 and list 2 then we would have created bias against all homes in the beginning and the end of each groups list. To ensure we dont create bias we will use the entire data contained within each group. Data Collection The data collected via the Real Estate Data Set is displayed below in both Frequency distribution and histogram:

Primary data refers to information obtained firsthand by the researcher on the variables of interest for the specific purpose of the study. (Sekaran, 2003, p. 219). Methods of collecting primary data are: Questionnaires Observations

Team C Research Focus group interviews Interviews Within any data collection arises ethical concerns. Self-serving reasons and confidentiality are two major ethical concerns. Sponsors and those who collect the data should ensure that the study is conducted in betterment of the organization and not for any self-serving reasons. In addition, confidentiality should be respected and disclosed to individuals. Data collection is an important part of performing a valid t-test, which assures a real difference between the two populations, rather than just a chance difference in the

samples selected. The data used for this test was referenced from rEsource (2008) real estate data sets and supplied information on different types of data around the sale of 105 homes; the data used for this test. The data source necessary for the test includes the price of homes for groups 1 and 2. Central Tendency Central tendency examines data values to determine where the data is concentrated, what seems to be the typical data point and what data point is in the middle. You can accomplish this by looking at the mean, median and mode of the data you are researching. In our research we are examining 2 groups of prices. We will be using the median to calculate our central tendency. The equation that represents

median is

Team C Research By using megastat we have determined for Group 1 our mean price is 232.0, median of 225.6, and mode of 312.1. Group 2 has a mean price of 210.4, median of 207.5, and mode of 209.3. Dispersion Dispersion is a formal calculation of the spread as related to your data. Dispersion is used to contrast central tendency. Dispersion can be calculated using

range, variation, standard deviation, and coefficient of variation. For our research we will choose to use standard deviation. We have a non-negative number in both our data sets and they deal with the same units of measurements being home prices. The

. (Doane and

Using megastat our sample standard deviation for Group 1 is 48.1. The n for Group 1 is 52 as there are 52 home prices listed. The sample standard deviation for Group 2 is 43.9. The n is 53 as there are 53 prices listed. Skew of the Data The degree of skewness can be examined by looking at the histogram of your data or by comparing the mean and the median. In symmetric data the mean and the median are about the same. When the mean is more than the median you are positively skewed right. When the mean is less than the median you are negatively skewed left. This can be seen in the following visual.

Team C Research

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(Doane and Seward, 2007) In Group 1, our mean is more than our median and represents a positive skew to the right. By using megastat, Group 1 represents a right skew of .396. In Group 2, our mean is more than our median and represents a positive skew to the right. By using megastat, Group 2 represents a right skew of .530. Discussion of Central Tendency and Dispersion The most familiar statistical measure of central tendency is the mean. It is the sum of the data values divided by number of data items. For a population we denote it , while for a sample we call it x. (Doane and Seward, 2007) However, by looking at the data and the skew, median would be the best measure of central tendency for both data sets. Median is associated with data that has ordinals that exceed + 3 in standard deviation. Median will allow us to ignore these extremes. Median would be the most accurate due to the smaller size of the data set, as well as, the slight skew to the right, even though the skew is very minimal. The simple form of measuring deviation is range, which just compares the high and low scores in a data group. However, we have decided to use standard deviation for the best measure of dispersion of our data. Standard deviation is simply the measure of dispersion from

Team C Research the mean of a data group. The reason we chose standard deviation for the best measure is because of its accuracy in measuring the deviation of the data. Conclusion Accepting or rejecting the Ho hypothesis is based on the decision rule. The decision rule for this experiment establishes the critical value, which creates the threshold for accepting or rejecting the hypothesis.

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The 2 samples used are independent samples. Group 1 includes homes less than 15 miles from the city and has a mean price of 232.0 with a standard deviation of 48.1. Group 2 includes homes equal to or more than 15 miles from the city and has a mean price of 210.4 with a standard deviation of 43.9. Based on a 95% confidence interval and a population sample of 105, the null hypothesis will be rejected if the calculated t-value is greater than 1.984 and is therefore, to the right of the critical value in the normal distribution bell curve. If the calculated t-value is less than 1.984 and therefore, falls to the left of the critical value on the normal distribution bell curve, the null hypothesis will not be rejected. (Doane, Seward, 2007). The critical value of this test will be point .05 in order to make sure the results are significant. This will help to make sure the probability of achieving the results by chance are less than .05. Based on the average price of homes in groups 1 and 2, the calculated tvalue is 2.41. The calculated t-value is greater than the 1.984 with a 95% confidence interval. The null hypothesis is therefore, rejected. After completing the hypothesis test using the above design experiment and decision rule [reject Ho if the calculated t-value is greater than 1.984], it was determined that the null hypothesis which stated, There is

Team C Research no statistically significant difference in the mean of home prices in group 1 and the mean of home prices in group 2 is rejected based on a 95% confidence interval. Further testing would be required. There are many other factors such as

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garage size, square footage, lot size, and presence or absence of a pool that may also affect the prices but were not taken into consideration for the purposes of this test. Further testing would be required with these dependent variables to determine the statistical affect on price.

Team C Research Reference Doane, D. and Seward, L. (2007). Applied Statistics in Business and Economics. Retrieved from

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https://ecampus.phoenix.edu/content/eBookLibrary2/content/DownloadList.aspx? Joseph T.L. Ooi and Sze-Teck Lee (2006) Price Discovery between Residential Land & Housing Markets. Retrieved from http://business.fullerton.edu/finance/jhr/pdf/past/vol15n2/01.95_112.pdf Liv Osland, Inge Thorsen, and Jens Petter Gitlesen (2007) Housing Price Gradients in a Region with One Dominating Center. Retrieved from http://business.fullerton.edu/finance/journal/papers/pdf/past/vol29n03/05.321_34 6.pdf R. Sirpal (1994) Empirical Modeling of the Relative Impacts of Various Sizes of Shopping Centers on the Values of Surrounding Residential Properties. Retrieved from http://business.fullerton.edu/finance/journal/papers/pdf/past/vol09n04/v09p487.p df Richard J. Cebula (2007) Impact of the Real Median Price of Single- Family Homes on Geographic Mobility, 20002005 Retrieved from http://business.fullerton.edu/finance/jhr/pdf/current/vol16n2/05.143_150.pdf Sekaran, U. (2003). Research Methods for Business. A Skill-Building Approach, Fourth Edition. Retrieved from https://ecampus.phoenix.edu/content/eBookLibrary2/content/eReader.aspx? assetMetaId=472cb01a-2740-48de-bc3f-4a944fcdf084&assetDataId=932415a2-

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