Master of Science in Business Analytics
Master of Science in Business Analytics
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Projects
2021-2022
Analyzing California Real Estate Market Opportunities for Redfin
Student Team
Juvenal M. Lopez, Armen Kniazyan, Jonathan Andia, Jayant Balusu
Faculty Advisors
Dr. Shih Tang Hwu, Dr. Mohamed Gomaa, Dr. Hyounae (Kelly) Min
Purpose
The United States economy has gone through many economic hurdles during the past few years. This study is designed to provide insights into the effects of mortgage rates in the California real estate market. In addition, it seeks to provide Redfin recommendations based on changing mortgage rate conditions in different regions in California. This study is being conducted shortly after the global COVID-19pandemic which caused historically low-interest rates for 2020 and 2021 followed by high inflation in mid-2022.
Study Design/Methodology/Approach
To achieve the objectives, a Panel Linear Model (PLM) was used to regress against Redfin's dataset. Mortgage rates are included to measure the effects on different California regions. The focus will be on California areas in which homes sold over their listing price. The analysis begins in January 2017 and goes through January 2022. California is divided into 6 regions and the PLM model is run for each region to provide meaningful results and provide Redfin with revenue-generating recommendations.
Findings
In this analytical study, it was found that the California region that was least affected by rising mortgage rates was the San Joaquin Valley. The PLM model provided meaningful insights into the effects of rising mortgage rates and how Redfin can position itself in the San Joaquin Valley to mitigate the effects of rising mortgage rates.
Originality/Value
This analysis was conducted during a very unique time in recent history. The COVID-19 pandemic caused uncertainty within the real estate market in 2020 and 2021, and there are no predictions on the effects that mortgage rates will have after the pandemic ends. This study will shed light on which California regions will be most affected by changing mortgage rates. Companies such as Redfin can benefit from this research.
Practical Implications
Redfin can utilize the analysis findings to improve their resource utilization in California. The project findings will measure the impact that mortgage rates have in six distinct regions across California. This will allow Redfin to strategize with regard to where resources will be the least affected by rising mortgage rates. The findings will provide Redfin with a competitive edge against its competitors.
Keywords
California Real Estate, Mortgage Rates, Federal Interest Rate, Housing Market, Panel Linear Model (PLM), Panel Data, California Regions