Econmetrics Essay Example | Topics and Well Written Essays - 250 words

Econmetrics - Essay Example For instance, when a property undergoes growth, the price of houses goes up. On the other hand, when a property undergoes decay, the price of houses goes down. Thus, these circumstances will affect the general value of houses severely. Demand for houses is a vital aspect in the model. In situations when the demand for houses exceeds the available houses in the market, the price of houses increases as people willingness to purchase also increase. As the demand for houses reduces, the price of houses also reduces since people will not have the will to purchase. Supply of houses has always surpassed its demand. For instance, when the supply of houses increases, the price of houses goes down since the property owners will need to off-load the houses in their possession. Thus, increase in supply will create or rather offer opportunities for the potential buyers in the real estate market. The regression principle in real estate refers to a high value property, in a location of low value property, being affected by the lower price of houses in the neighborhood. The real values of such houses are not always achieved. On the other hand, the progression principle refers to the increase in the general value of a low value house which is located among the houses of higher value. Thus, the low value houses are always priced relatively higher than their real prices. Therefore, the econometric model: House price= Demographic changes + Demand + Supply + Progression + Regression, is a statistical model. The dependent variable (House Price) on the left hand side is fully determined by the independent variables (Demographic changes, Demand, Supply, Progression, and Regression) on the right hand side. The independent variables are the factors that determine the value of houses in the real