When we visited Easton Realty Company (A), in Chapter 16, Sam Easton was concerned about two former clients who complained that Easton Realty had underpriced their houses in order to get a quick sale and collect their realty fee. In defending his company against these charges, Mr. Easton obtained a set of residential sales data on recent home sales in the Dallas–Fort Worth metroplex area. The data included the sale month, the sale price, the size of the home in square feet, the number of bedrooms, the age of the house, whether the house was located in Dallas versus somewhere else in the Dallas–Fort Worth metroplex, and whether Easton was the real estate company that handled the sale. In this chapter, you will be asked to help Mr. Easton gain a better understanding of what determines the selling price of a house, and you will be using the same variables that were introduced earlier, in Easton Realty (A). The data are in the EASTON data file.
1. As a first step in helping Sam Easton better understand how the sales price of a residential property is determined, construct a correlation matrix for the variables PRICE, SQFEET, BEDROOMS, AGE, DALLAS, and EASTON. Examine the matrix and advise Mr. Easton as to which variable seems to be the most important in explaining the variation in residential housing prices. You can expect Mr. Easton to be a little skeptical, since he realizes that the sales price of a house depends on many other factors besides the one you have identified.