House Purchase Planner (Orange County, CA)

Background

Buying a house is an emotional as well as a financial decision. It is crucial to find a house that one likes and that is also affordable at the same time. Therefore, before starting the house hunting process, it helps to find out first which type of house one likes, which locations are preferred, and perhaps most importantly if the chosen options are financially feasible.

The House Planner application is designed to help prospective homebuyers to find the right house at the right location according to homebuyers’ needs and budget. The application allows the homebuyer to choose house properties such as square footage, number of rooms or if the house should be equipped with a pool. In addition, an interactive map application enables users to select the location where they prefer to purchase the house. Based on these requirements the House Planner application estimates the overall price for such a house in Orange County. One of the unique benefits of the House Planner is that not only it provides the overall estimated house price, it also calculates for each house amenity (number of bedrooms, school quality, distance to the beaches, parks and shopping malls etc.) how much it adds or deducts to/from the average purchasing price. This helps the home buyer to have a full understanding of what exactly is the value he or she is getting for the price.

Furthermore, since the application makes it very easy for the user to re-adjust their preferences, the home buyer can recalibrate as many times as they want until they locate the perfect area that meets both their preference and their budget.

The research behind the House Planner application is based on a hedonic regression model and more than 40,000 sales records (provided by CoreLogic). Each sales record includes information about the sales date and price as well as address, square footage, number of bedrooms and flag variables that showed if the house had a pool or if it was a foreclosure/short sale property. These sales records where then enriched with location information such as school quality and driving distances/times to beaches, major parks and shopping malls. The econometric model also includes a variable that reflects the general market conditions. It is updated on a regular base to keep the model current.

Although the model has only an average margin of error of +/- 10%, it cannot substitute for on-site appraisal because many factors that contribute to a house price can only be observed through a personal inspection. However the House Planner application can be extremely helpful when making a decision on how big a house should be and what locations are suitable.