House-Price-Prediction-and-Collinearity-with-Stock-Market-Indexes
Buying a house is usually the most monumental purchase in a person’s life. It takes years of hard work to build enough credit and savings to be qualified for a mortgage. When taking such a significant step you want to be sure that you are paying the right price, and that you are buying at the right time. The same is true for when you decide to sell a house: price and timing are paramount. The ability to strategically buy and sell houses is of great interest to both real estate brokers and homeowners, as well as a new wave of tech-heavy real estate startups such as Compass. With the introduction of Big Data to the real estate market, machine learning has become commonplace to better manage the buying and selling process.
The timing of a property purchase or sale plays a critical role in the valuation of the property, and many basic housing valuation algorithms do not take market conditions into account. Based on literature review, the correlation between financial market conditions and housing market conditions is unknown. We aim to uncover the following concept: the correlation between real estate property prices and financial market. Gaining this knowledge has the potential to greatly impact the home buying and selling processes by providing end-users with the ability to better time their purchases or sales.
The goal of this study is to develop a model that both produces accurate home valuations as well as understands a home value’s relationship with market conditions. This model would provide both buyers and sellers with the tools necessary to not only strategically price their properties, but also know when to act on their properties. In order to execute this project’s approach to predictive modeling, supervised learning methods were applied that include a variety of regression and classification techniques. The models used for regression were a Dummy Regressor as the baseline, Multiple Linear Regression, Ridge Regression, Lasso Regression, Regression Tree, Random Forest Regression, and Support Vector Regression. The classification models used in this project were K-Nearest Neighbor and Support Vector Classifier. Also, a few forecasting techniques were implemented such as AutoRegression and Prophet package algorithms.