Ames House Prices

Introduction

You have just joined a new "full stack" real estate company in Ames, Iowa. The strategy of the firm is two-fold:

• Own the entire process from the purchase of the land all the way to sale of the house, and anything in between.
• Use statistical analysis to optimize investment and maximize return. The company is still small, and though investment is substantial the short-term goals of the company are more oriented towards purchasing existing houses and flipping them as opposed to constructing entirely new houses. That being said, the company has access to a large construction workforce operating at rock-bottom prices.

1. Estimating the value of homes from fixed characteristics

Develop an algorithm to reliably estimate the value of residential houses based on fixed characteristics.

2. Determine any value of changeable property characteristics unexplained by the fixed ones

Identify characteristics of houses that the company can cost-effectively change/renovate with their construction team.

3. What property characteristics predict an "abnormal" sale?

Evaluate the mean dollar value of different renovations.

Overall Approach

Data Pre-processing

• Cleaning and Feature-Engineering of data
• Identify fixed vs changeable features
• For the 3rd step, my first use of SMOTE to address class imbalance.

Modelling

• Linear Regression used to regress vs fixed characteristics, with Regularizaion to effectively remove unimportant features and colinearity
• Isolate residuals and model those separately as being influence by changeable features

Evaluation

• Evaluate coefficients for reasonableness
• Train a model on pre-2010 data and evaluate its performance on the 2010 houses.