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Using Conjoint Analysis to Determine Importance of Standard House Stats

Conjoint Analysis Home buyingDuring my recent first time home buying experience I learned there are many, often competing, factors to consider.   My last blog discussed how I used Bracket™, a tournament-based analytic approach, to determine what homebuyers find most important when considering a home. My list of 13 items did not include standard house stats like # of bedrooms, # of baths, etc. To measure preference for those items I used a conjoint design.

I framed up the conjoint exercise by asking homebuyers to imagine they were shopping for a home and to assume it is located in their ideal location. Using our online panel of consumers, we showed recent or soon-to-be homebuyers 2 house listings side by side, plus an “I wouldn’t choose either of these” option. Each listing included the following:

        • Number of bedrooms: 1, 2, 3 or 4
        • Number of bathrooms: 1 full, 1 full/1 half, 2 full, 2 full/1 half or 3 full
        • House style: Single Family, Townhouse, Condominium, or Multi-Family
        • House condition: Move-in ready, Some work required or Gut job
        • Price: $150,000, $200,000, $250,000, $350,000 or $450,000

I felt a conjoint was best suited here, because in addition to importance, I wanted to see what trade-offs homebuyers were willing to make between these 5 items that are highly important in home buying. Are homebuyers willing to give up a bedroom to get the right price? Are they willing to do some sweat equity to get the number of bedrooms and/or bathrooms they want?

We found the top three most important factors are # of bedrooms, price and house condition. This made perfect sense to me as I would not consider any house with less than 3 bedrooms. Price and house condition were the next two key pieces. Was the house in my price range? How much work was needed? Did the price give me enough wiggle room for repairs? I was curious to see the play between price and house condition among the recent and soon-to-be homebuyers we interviewed.

Using the simulator I selected a 3 bedroom , 2 full baths, Single Family home. I picked 3 price points ($150,000, $300,000, $450,000) and then varied the house condition. Overall, homebuyers are less interested in a "gut job" compared to "move-in-ready". However, at the $150,000 price point, share of preference drops more drastically going from "move-in-ready/some work required" to "gut job" compared to higher price points.

Conjoint Analysis home buying priorities

This makes sense as those shopping at lower price points most likely have less disposable income available for major repairs. In fact, when I look at the $150,000 and $300,000 price points and house condition by those with an income of less than $75K vs. those making $75K or more, we see that preference for a “gut job” is much lower among those making less money.

 

House Price: $150,000

House Price: $300,000

Income: <$75K

Income: $75K+

Income: <$75K

Income: $75K+

Move-in-ready

92%

93%

55%

71%

Some work required

82%

84%

42%

62%

Gut job

47%

56%

25%

42%

Trying to find the perfect balance of price and house condition can be stressful and for some takes longer than others. For me, I looked at over 80 homes before finding my “perfect” home. Compared to the homebuyers we surveyed that’s on the high side (average 12). Must be the researcher in me that wants to be through and exhaust every possibility :)

Amy tends to weave her love for food and fitness into her blog entries. He unique take provides an interesting read. She often utilizes TRC's online consumer panel to answer her research questions.

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