In September 2007, U.S. home prices continued to fall at a record pace, and price declines in Los Angeles and Orange counties in California outpaced other major metropolitan areas (Los Angeles Times, November 28, 2007). The report was based on the Standard & Poor’s/Case-Shiller index that measures the value of single-family homes based on their sales histories. According to this index, the prices in San Diego dropped by an average of 9.6% from a year earlier. Assume that the survey was based on recent sales of 34 houses in San Diego that also resulted in a standard deviation of 5.2%. Can we conclude that the mean drop of all home prices in San Diego is greater than the 7% drop in Los Angeles? Use a 1% level of significance for the analysis.
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