Memo #2
You and your teammates work for a statistical consulting firm. You have recently been hired by the Des Moines Register to provide the background analysis for an upcoming news story on the housing market in Des Moines, Iowa. Des Moines is the capital city of Iowa and is also the largest metropolitan area in the state. The Des Moines Register is a nationally-recognized newspaper that often conducts investigative journalism involving statistical analysis.
The Register has asked you to analyze the value of homes in Des Moines before and after the turbulent month of September 2008, in which many unfortunate events involving the U.S. housing and financial markets occurred. For example, on September 7, the federal government seized control of the two mortgage giants, Fannie Mae and Freddie Mac, which at the time backed more than three-quarters of all mortgages in the U.S; on September 15, the global financial services firm Lehman Brothers filed for bankruptcy; and for the month of September, the Dow Jones Industrial Average was down over 6% (with another 16% lost by the end of the year).
Data
Using Polk County public records, you have collected the following data[1]:
information on approximately 2,700 single-family homes sold in Des Moines during the one-year period September 1, 2007 to August 31, 2008 (called pre-crisis data);
information on approximately 690 single-family homes sold in Des Moines during the period October 1, 2008 to March 4, 2009 (called post-crisis data).
The data is available in an Excel workbook on the course web site.Please pay special attention to the exact definition of the variables in the data, given on the description sheet. Note that the workbook contains an additional pre+post sheet that has the pre-crisis and post-crisis data combined.
Assignment
Your assignment is to prepare a memo (4 pages maximum) that analyzes the Des Moines housing market before and after September 2008. To start, compare the distributions of some important variables in the pre- and post-crisis data. Specifically:
· How does the distribution of sales price for homes sold post-crisis compare with the distribution pre-crisis?
· How does the distribution of home size (above-ground area) for homes sold post-crisis compare with the distribution pre-crisis?
· Is there any change in the condition of homes sold post-crisis compared to those sold pre-crisis?
· Is there any change in the relationship between home size and average sales price for homes sold post-crisis compared to those sold pre-crisis?
[1] The data was actually collected by Professor Sam Burer, Tippie College of Business, and has been edited to remove observations with extreme values of several variables, including sales price.