Buildings (May 2024)
Machine Learning Insights: Exploring Key Factors Influencing Sale-to-List Ratio—Insights from SVM Classification and Recursive Feature Selection in the US Real Estate Market
Abstract
The US real estate market is a complex ecosystem influenced by multiple factors, making it critical for stakeholders to understand its dynamics. This study uses Zillow Econ (monthly) data from January 2018 to October 2023 across 100 major regions gathered through Metropolitan Statistical Area (MSA) and advanced machine learning techniques, including radial kernel Support Vector Machines (SVMs), used to predict the sale-to-list ratio, a key metric that indicates the market health and competitiveness of the US real estate. Recursive Feature Elimination (RFE) is used to identify influential variables that provide insight into market dynamics. Results show that SVM achieves approximately 85% accuracy, with temporal indicators such as Days to Pending and Days to Close, pricing dynamics such as Listing Price Cut and Share of Listings with Price Cut, and rental market conditions captured by the Zillow Observed Rent Index (ZORI) emerging as critical factors influencing the sale-to-list ratio. The comparison between SVM alphas and RFE highlights the importance of time, price, and rental market indicators in understanding market trends. This study underscores the interplay between these variables and provides actionable insights for stakeholders. By contextualizing the findings within the existing literature, this study emphasizes the importance of considering multiple factors in housing market analysis. Recommendations include using pricing dynamics and rental market conditions to inform pricing strategies and negotiation tactics. This study adds to the body of knowledge in real estate research and provides a foundation for informed decision-making in the ever-evolving real estate landscape.
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