Augmenting Geostatistics with Matrix Factorization: A Case Study for House Price Estimation

Abstract

Singular value decomposition (SVD) is ubiquitously used in recommendation systems to estimate and predict values based on latent features obtained through matrix factorization. But, oblivious of location information, SVD has limitations in predicting variables that have strong spatial autocorrelation, such as housing prices which strongly depend on spatial properties such as the neighborhood and school districts. In this work, we build an algorithm that integrates the latent feature learning capabilities of truncated SVD with kriging, which is called SVD-Regression Kriging (SVD-RK). In doing so, we address the problem of modeling and predicting spatially autocorrelated data for recommender engines using real estate housing prices by integrating spatial statistics. We also show that SVD-RK outperforms purely latent features based solutions as well as purely spatial approaches like Geographically Weighted Regression (GWR). Our proposed algorithm, SVD-RK, integrates the results of truncated SVD as an independent variable into a regression kriging approach. We show experimentally, that latent house price patterns learned using SVD are able to improve house price predictions of ordinary kriging in areas where house prices fluctuate locally. For areas where house prices are strongly spatially autocorrelated, evident by a house pricing variogram showing that the data can be mostly explained by spatial information only, we propose to feed the results of SVD into a geographically weighted regression model to outperform the orginary kriging approach.