THE FLORIDA POOL HOME CASE DS PoolHome

In Florida, real estate agents refer to homes having a swimming pool as pool homes. In this case, Sunshine Pools Inc. markets and installs pools throughout the state of Florida. The com- pany wishes to estimate the percentage of a pool's cost that can be recouped by a buyer when he or she sells the home. For instance, if a homeowner buys a pool for which the current pur- chase price is $30,000 and then sells the home in the current real estate market for $20,000 more than the homeowner would get if the home did not have a pool, the homeowner has recouped (20,000/30,000) X 100% = 66.67% of the pool's cost. To make this estimate, the company randomly selects 80 homes from all of the homes sold in a Florida city (over the last six months) having a size between 2,000 and 3,500 square feet. For each sampled home, the following data are collected: selling price (in thousands of dollars); square footage; the number of bathrooms; a niceness rating (expressed as an integer from 1 to 7 and assigned by a real estate agent); and whether or not the home has a pool (1 = yes, 0 = no). The data are given in Table 3.11. Figure 3.27 gives descriptive statistics for the 43 homes having a pool and for the 37 homes that do not have a pool.

a Using Figure 3.27, compare the mean selling prices of the homes having a pool and the homes that do not have a pool.

b Using these data, and assuming that the average current purchase price of the pools in the sample is $32,500, estimate the percentage of a pool's cost that can be recouped when the home is sold.

c The comparison you made in part (a) could be misleading. Noting that different homes have different square footages, numbers of bathrooms, and niceness ratings, explain why.

Text Book: Business Statics in Practice By BOWERMAN.