Sales data for single-family houses in a Dallas suburb were used to estimate the following regression equation:

where P = sale price, S = square feet of living area, G = garage square feet, A = age of house in years, B = number of baths, and T = 1 if two-story, 0 if not.
The standard errors are in parentheses.

a. What is the predicted sale price of a two-story, 10-year-old house with 2,000 square feet of living space, three baths, and a 300-square-foot garage? Does this predicted sale price seem reasonable to you?

b. Which of the estimated coefficients in the regression equation are statistically significant at the 5 percent level? How can you tell?

c. Does the sign and size of each coefficient seem reasonable? In each case, explain your reasoning.

d. Do you think that the parameters of housing regression equations change over time? Why or why not? Be specific.

Transcribed Image Text:

P=60,076+75.1S+36.4G-3,295A +4,473B-14,632T, R2 = 0.84 (14.4) (19.7) (12.1) (1,078) (1,708) (3,531)