An investor currently owns real estate in the college town of Blacksburg, Virginia—home to the Virginia Tech Hokies. He would like to expand his holdings by purchasing similar rental property in either Athens, Georgia, or Chapel Hill, North Carolina. As a preliminary step, he would like information on house prices in these two areas. He is interested in properties that have at least two bedrooms and that are listed for less than $1,000,000. The following report will summarize previous sales that have satisfied these criteria. 

There are a number of reasons why you might consider investing in a rental property near a university. First, there’s a large pool of renters, including students, faculty, and staff. Second, because many universities are unable to house their students beyond freshman year, students offer a steady stream of rental demand. Finally, university towns tend to be filled with restaurants, shopping, and nightlife. All of these factors can make it easier for you to market your property. The following report examines house prices in Athens, Georgia—home to the University of Georgia Bulldogs—and Chapel Hill, North Carolina—home to the University of North Carolina Tar Heels. The sample consists of 293 house sales in Athens and 351 house sales in Chapel Hill. In addition, all houses in the sample had at least two bedrooms and sold for less than $1,000,000. Table 3.19 provides the most relevant summary measures for the analysis.

Summary Measures for House Prices (in $) in Athens and Chapel Hill

The average house price in Athens is $219,671, as opposed to $429,152 in Chapel Hill, a difference of almost $210,000. In Athens, the median house price is $177,500, suggesting that half of the house prices are below this value and half are above this value. The corresponding value in Chapel Hill is $395,000. The difference in medians between these two cities is close to $218,000. In both cities, the median is quite a bit less than the mean, which implies that outliers, some extremely high house prices in this case, are likely present. 

While the mean and the median represent where house prices tend to cluster, they do not relay information about the variability in house prices. Generally, standard deviation is used as a measure of variability. The standard deviation for house prices in Chapel Hill is greater than the standard deviation for house prices in Athens ($186,762 > $147,648), suggesting that, compared to Athens, house prices in Chapel Hill are more dispersed from the mean.

Table 3.20 shows the relative frequency distribution for the house prices in both cities. The relative frequency distribution reinforces the findings from the summary measures, that is, house prices in Athens are more affordable than houses in Chapel Hill. In Athens, 51% of the prices fell in the range $100,000 to $200,000, but only 9% of the prices in Chapel Hill fell in this range. Moreover, 91% of houses in Athens versus only 51% of houses in Chapel Hill sold for less than $400,000.

Table 3.20 Frequency Distribution for House Prices in Athens and Chapel Hill  

Finally, Figure 3.24 shows the boxplots of house prices for each city. The boxplots reveal two more major points with respect to house prices in these two cities: 

• In each boxplot, the median is off-center within the box, being located to the left of center. 
• In each boxplot, there are outliers on the right side. However, there are far fewer outliers in the Chapel Hill distribution as compared to the Athens distribution. 

These two observations suggest that both distributions are positively skewed. This implies that the bulk of the house prices falls in the lower end of the distribution, and there are relatively few very-high-priced houses.

Boxplots of house prices in Athens, Georgia, and Chapel Hill, North Carolina

This report summarizes house prices in Athens, Georgia, and Chapel Hill, North Carolina. On average, houses in Chapel Hill are almost twice as expensive as those in Athens. Moreover, if outliers are removed from the analysis, house prices in Athens are less variable than house prices in Chapel Hill. However, before any investor purchases property in either city, many other factors should be considered, such as the strength of the rental market and average income in each city.