What Drives Real-Estate Prices in Pittsburgh?

8/20/2017

This morning I had a chance to look into a dataset of 7,584 homes sold between Aug 2016 and Aug 2017, in the Greater Pittsburgh Area, from the West Penn Multi-List. This dataset included 9 of the most desirable counties in the area and encompassed 76 unique areas (each corresponding to at least one unique school district). The range of prices of sold homes in the area had a mean of $249,204.73 +/- 2127.51 (std dev: $185,276) with sold prices going all the way up to $2,165,000.00!

Contrary to common belief I found that while Sold Price was a function of List Price (see Figure below) with a 70% predictive strength, the number of Full Baths were a better descriptor of the variability in Sold Price than number of Bedrooms and County put together!

So, how does List Price compare with Sold Price, for homes with an increasing number of bedrooms? Clearly more expensive homes have a greater likelihood of having more bedrooms, but a really pricey home may still not be the mansion you would expect it to be, while even less expensive homes can have up to 7 bedrooms!

Now lets take a look at how List Price compares with Sold Price, for homes with an increasing number of full bathrooms. The plot below makes it clear that the more pricey homes (especially the highest rung in the ladder viz. homes which sold for above $344k) had a greater likelihood of having more full baths!

To conclude, the data also had something to reveal from the standpoint of the typical Seller Agent's mindset! The statistics make it clear that this group of individuals love a good haggle! The mean List Price for a sold home at $258,289.08 +/- 2282.84 was ~3.6% higher in comparison with the statistically significantly lower ($249,204.73 +/- 2127.51, p=0.0036) Sold Price for these homes! So, if you're on the market for a home in Pittsburgh, you'll want to be sure to get your Buyer Agent is capable of haggling your price down at least $9k if you plan on signing a Buyer's Agent Contract.

1 Comment

Btec Applied Science Help link

2/17/2022 10:20:52 pm

I always wanted to know this, what's the reason behind the price inflation and deflation in real estate?. Very well explained. I have a plan to invest in real estate once I got financially stable.

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Prof. Prahlad G Menon, PhD

Dr. Menon is an Associate Professor of Mathematics with appointments in Bioengineering at University of Pittsburgh and Biomedical Engineering at University of Texas at San Antonio. He was previously a tenure-track, early-career assistant professor with the department of biomedical engineering at Duquesne University (Pittsburgh, PA) and until May 2015 on the faculty of the electrical and computer engineering (ECE) department in Carnegie Mellon University joint institute of engineering with Sun Yat-sen University (Pittsburgh, PA, USA and Guangzhou, China), where he currently maintains an adjunct professor appointment. He has served as adjunct faculty with the Dept of Biomedical Engineering at Carnegie Mellon University as well as the Heinz College of Information Science at Carnegie Mellon University. Dr. Menon's research group, The MeDCaVE, has its interests in the broad area of AI / data science applied to medical imaging analysis for biomarker discovery and more specifically in computational simulation of vascular flows and cardiovascular biomechanics, with application to diagnostics, surgical planning and interventional guidance.

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