Incorporating remote sensing information in modeling house values: A regression tree approach

This paper explores the possibility of incorporating remote sensing information in modeling house values in the City of Milwaukee, Wisconsin, U.S.A. In particular, a Landsat ETM+ image was utilized to derive environmental characteristics, including the fractions of vegetation, impervious surface, and soil, with a linear spectral mixture analysis approach. These environmental characteristics, together with house structural attributes, were integrated to house value models. Two modeling techniques, a global OLS regression and a regression tree approach, were employed to build the relationship between house values and house structural and environmental characteristics. Analysis of results indicates that environmental characteristics generated from remote sensing technologies have strong influences on house values, and the addition of them improves house value modeling performance significantly. Moreover, the regression tree model proves as a better alternative to the OLS regression models in terms of predicting accuracy. In particular, based on the testing dataset, the mean average error (MAE) and relative error (RE) dropped from 0.202 and 0.434 for the OLS model to 0.134 and 0.280 for the regression tree model, while the correlation coefficient between the predicted and observed values increased from 0.903 to 0.960. Further, as a nonparametric and local model, the regression tree method alleviates the problems with the OLS techniques and provides a means in delineating urban housing submarkets.