Week2 Excel Problem Statement Real Estate-1

Assignment – Terro’s real estate agency
Real estate data analysis – Exploratory data analysis, Linear Regression
Problem Statement (Situation):

“Finding out the most relevant features for pricing of a house”
Terro’s real-estate is an agency that estimates the pricing of houses in a certain locality. The pricing is
concluded based on different features / factors of a property. This also helps them in identifying the
business value of a property. To do this activity the company employs an “Auditor”, who studies
various geographic features of a property like pollution level (NOX), crime rate, education facilities
(pupil to teacher ratio), connectivity (distance from highway), etc. This helps in determining the price
of a property.
The agency has provided a dataset of 506 houses in Boston. Following are the details of the dataset:
Data Dictionary:
Attribute Description
CRIME RATE per capita crime rate by town
INDUSTRY proportion of non-retail business acres per town (in percentage terms)
NOX nitric oxides concentration (parts per 10 million)
AVG_ROOM average number of rooms per house
AGE proportion of houses built prior to 1940 (in percentage terms)
DISTANCE distance from highway (in miles)
TAX full-value property-tax rate per $10,000
PTRATIO pupil-teacher ratio by town
LSTAT % lower status of the population
AVG_PRICE Average value of houses in $1000's
Objective (Task):
Your job, as an auditor, is to analyze the magnitude of each variable to which it can affect the price of
a house in a particular locality.
To do the analysis, you are expected to solve these questions:
1) Generate the summary statistics for each variable in the table. (Use Data analysis tool pack). Write
down your observation. (5 marks)
2) Plot a histogram of the Avg_Price variable. What do you infer? (5 marks)
3) Compute the covariance matrix. Share your observations. (5 marks)
4) Create a correlation matrix of all the variables (Use Data analysis tool pack). (5 marks)
a) Which are the top 3 positively correlated pairs and
b) Which are the top 3 negatively correlated pairs.
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5) Build an initial regression model with AVG_PRICE as ‘y’ (Dependent variable) and LSTAT variable as
Independent Variable. Generate the residual plot. (8 marks)
a) What do you infer from the Regression Summary output in terms of variance explained,
coefficient value, Intercept, and the Residual plot?
b) Is LSTAT variable significant for the analysis based on your model?
6) Build a new Regression model including LSTAT and AVG_ROOM together as Independent variables
and AVG_PRICE as dependent variable. (6 marks)
a) Write the Regression equation. If a new house in this locality has 7 rooms (on an average) and
has a value of 20 for L-STAT, then what will be the value of AVG_PRICE? How does it compare
to the company quoting a value of 30000 USD for this locality? Is the company Overcharging/
Undercharging?
b) Is the performance of this model better than the previous model you built in Question 5?
Compare in terms of adjusted R-square and explain.
7) Build another Regression model with all variables where AVG_PRICE alone be the Dependent
Variable and all the other variables are independent. Interpret the output in terms of adjusted R-
square, coefficient and Intercept values. Explain the significance of each independent variable with
respect to AVG_PRICE. (8 marks)
8) Pick out only the significant variables from the previous question. Make another instance of the
Regression model using only the significant variables you just picked and answer the questions
below: (8 marks)
a) Interpret the output of this model.
b) Compare the adjusted R-square value of this model with the model in the previous question,
which model performs better according to the value of adjusted R-square?
c) Sort the values of the Coefficients in ascending order. What will happen to the average price if
the value of NOX is more in a locality in this town?
d) Write the regression equation from this model.
HINT: Significant variables are those whose p-values are less than 0.05. If the p-value is greater than
0.05 then it is insignificant
Learning Outcome (Result):

● Implementation of Exploratory Data Analysis helps you to understand the nature of different
data-attributes
● You will understand how to use various statistical/analytical tools in MS Excel like Summary
statistics, Histogram, correlation table, Regression analysis (using Data analysis tool pack)
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Assignment – Terro’s real estate agency

Real estate data analysis – Exploratory data analysis, Linear Regression

Problem Statement (Situation):

To do the analysis, you are expected to solve these questions:

Learning Outcome (Result):

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