When someone sets out to buy a house, they might make their decision based on wall-to-wall carpeting, some well-tended shrubs, or a white picket fence, right?
Not so much, says Cal Poly Pomona economics Professor Carsten Lange.
Prospective buyers generally are far more practical than romantic, Lange says, basing their decisions on the quality of neighborhood schools, the distance to shopping centers, the number of bedrooms and other quality-of-life factors.
“You don’t buy the house because you want the house,” Lange says. “You buy it because you want the amenities.”
It’s a theory known as hedonic demand, and it forms the core of a new real estate website Lange has developed (http://www.houseplanner.info). He is currently focusing on Orange County, though the underlying model would apply virtually anywhere.
What sets Lange’s site apart from other real estate websites is that his allows users to see exactly what they’re paying for when looking at a home. An interactive map is color-coded, showing average home prices at different locations in Orange County, and how these prices are affected by school quality or the distance to attractions such as parks, malls or beaches.
Lange hopes that arming homebuyers with that information will help them find a house that suits their needs at a price they can afford. Someone who has no children probably wouldn’t want to pay more to live near good schools, for example.
The central tenet is, “If I’m willing to give this up, what can I save?” Lange says.
The idea for the site came to Lange while he was searching for his first house and found that kind of information just wasn’t available to consumers.
“I drove my real estate agent nuts when I bought my first home,” Lange says.
In 2009, the university’s Provost Teacher-Scholar Program awarded a grant to Lange that gave him two summers to research the Orange County housing market. “That gave me the opportunity to entirely focus on it,” he says.
CoreLogic, a leading provider of real estate information, provided the data, and Lange processed the records using geographic information systems. After developing a model, Lange decided a website would be the best way of making his research useful to the public. He plans to gradually expand the site to cover the entire Los Angeles region.
The site is a work in progress, but is fully functional and was coded entirely by Lange, who taught himself computer programming to undertake the project.
He hopes his site will make the process easier for potential buyers and their real estate agents by eliminating some of the “trial-and-error” method of driving around looking at house after house.
“It definitely helps to have a gut feeling first what makes a good location,” Lange says.