In the first phase of our model building process we made an attempt to identify what variables might have an effect on the median housing price in the city of Sacramento. In order to consider what variables we would include in our model we created a theory as to what would explain the median housing price in the city of Sacramento. We theorized that the median housing price would be a function of the amount of houses on the market, and that if the number of houses on the market were to experience an increase or decrease, the average price of a home would decrease or increase, respectively. We also theorized that the value of the ten-year treasury note would influence the median housing price because it dictates the mortgage rates, as well as the buying patterns of consumers. In addition to these factors we felt as though Consumer Price Index would play a role in that changes in inflation would influence purchasing power and the overall quantity of homes being purchased. On the same note, we felt that the average cost for a gallon of regular gasoline would be a good indicator of the cost of living, and in turn, a good indicator of what home prices might be doing. Finally, we felt as though the rate of unemployment would give us a further understanding of the overall health of the economy, and possibly give an explanation for any dramatic peaks or valleys that might be observed in our study.
To summarize the previous paragraph we have provided a list of the variables we will be including in our model.
1. Consumer Price Index
2. Ten Year Treasury Note
3. Housing Inventory
4. Regular Gasoline Prices
5. Unemplo ...