Should You Ignore the Weather When Buying a New House or Car?

(Photo: Alden Jewell)

An NBER working paper (full PDF here) by Meghan R. Busse, Devin G. Pope, Jaren C. Pope, and Jorge Silva-Risso explores the role of projection bias when choosing a new car or house. It turns out that weather conditions are a huge factor when consumers are debating big purchases like houses or cars. The abstract:

Projection bias is the tendency to overpredict the degree to which one’s future tastes will resemble one’s current tastes. We test for evidence of projection bias in two of the largest and most important consumer markets – the car and housing markets. Using data for more than forty million vehicle transactions and four million housing purchases, we explore the impact of the weather on purchasing decisions. We find that the choice to purchase a convertible, a 4-wheel drive, or a vehicle that is black in color is highly dependent on the weather at the time of purchase in a way that is inconsistent with classical utility theory. Similarly, we find that the hedonic value that a swimming pool and that central air add to a house is higher when the house goes under contract in the summertime compared to the wintertime.

The researchers found that a 20-degree increase in temperature will result in an 8.5 percent increase in the share of convertible cars sold, even in the spring or fall season. This effect does not take place if the weather is already hot. While hot weather means more convertibles, snow gives cars with 4-wheel drive a boost: about 2 percentage points during snow storms with 10 inches of snow. As the authors write:

Our findings are significant for several reasons. First, the car and housing markets in and of themselves are large and important. Identifying, and potentially correcting, systematic errors in these markets can have valuable welfare implications. Perhaps more importantly, our results suggest that projection bias may be prevalent in other important decisions (getting married, choosing a job, etc.) that are similarly distinguished by having large stakes, state-dependent utility, and low-frequency decision-making.

Related: having a job interview on a rainy day can hurt your chances.

Leave A Comment

Comments are moderated and generally will be posted if they are on-topic and not abusive.

 

COMMENTS: 16

View All Comments »
  1. KevinM says:

    OK, but I don’t necessarily get how we decide which decision is “distorted.” True, the “hedonic value” I assign to a swimming pool when shopping for a home in August 2012 may differ from the value I’ll assign it in December 2012. But it’s an extremely accurate predictor of the hedonic value I’d assign it in August 2013. Isn’t it just as plausible to say that the hot weather made my decisionmaking more, not less, accurate?

    Well-loved. Like or Dislike: Thumb up 21 Thumb down 3
  2. Kyle says:

    Great, this explains why no one has wanted to by my central air-less house during this heat wave. If it keeps up I might not be moving any time soon.

    Thumb up 3 Thumb down 1
  3. home buyer says:

    i can see some truth here. Just bought a new. quite old home- one that I never thought I would be able to afford- a “palace” of sorts. I feel blessed- so I guess there is some truth here in. As to hedonism- I see a distinction not yet made between appreciating beauty/art – the sorts of things that give pleasure and that one does not have to own to find pleasure in- like a beautiful sunset. swimming…. If one is so fortunate to have an opportunity to own a “master” painting, a pool or an original piece of architecture- well and good. But if not- going to a museum, to the beach- can offer such an opportunity for pleasure. i was and still am a “Flee market” junkie. But I would not call “art appreciation” or the appreciation of craftmanship, a Viennese waltz, salsa music, the beach in East Hampton……i.e., of beauty hedonism. That idea is “protestant” in origin.

    When I was a kid, I would ride my bicycle past the beautiful homes in my area of town and wish for one for myself. That was around 50 years ago. We all have hopes and dreams- I still do- and just made one of mine come true.

    So as to the weather- My new home is not perfect- On a clear day, I can see foreover when I look in between these buildings. Nothing is perfect. But this compromise- is as near to it as I can get.

    Thumb up 3 Thumb down 5
  4. frankenduf says:

    simpler version: dont food shop when ur hungry

    Well-loved. Like or Dislike: Thumb up 17 Thumb down 2
    • home buyer says:

      Hidden due to low comment rating. Click here to see.

      Disliked! Like or Dislike: Thumb up 3 Thumb down 14
  5. David Kramer says:

    There is a sampling issue here – if I’ve been thinking about a convertible for years, I’m probably going to pull the trigger on a beautiful, convertible worthy day. And it would be irresponsible not to drive it with the top down before buying it, so, odds are, I’m not shopping on a rainy day.

    Well-loved. Like or Dislike: Thumb up 15 Thumb down 1
    • home owner says:

      Yes, I guess there is always that “what if” that has to be factored in. What if the convertible machinery does not work. So of course you have to try it out and preferably not a rainy day. But what if the only day you have to try it out is a rainy day. Is this any different then What if I get a job far away from my dream home. In my case, I will still call it home and deal with that problem if and when the time arises. These what ifs are just unavoidable. If you factor in all the what ifs, you will never buy that car. There is no limit to them.

      Thumb up 2 Thumb down 5
      • Ken Arromdee says:

        The point is that on the *average*, this factor leads to people who want convertibles picking sunny days to buy one. If the only day you have to try it is a rainy day, then you’ll still try it on a rainy day, but the proportion of people who have this problem and thus try it on rainy days will be lower than average.

        Thumb up 0 Thumb down 2
    • Bjorn says:

      I think the take-home here is how one might use this type of statistical information to your advantage to get a lower price as buyer and increase the chance of making a sale or get a better price as seller. I don’t believe they claim to have decoded all the factors that play into explaining these statistical figures, although they for the most part are common sense.

      If you want to SELL a house with a pool, show it on sunny days in summer.
      If you want to BUY a house with a pool, try to get it when the weather is bad or cold, where you might have to contend with fewer other bidders.

      If you want to SELL your convertible, don’t put it up on craigslist on a rainy day in January.
      If you are going to buy TV time to advertize some convertible cars, check the 5 day forecast first.
      If you want to BUY a convertible, at least if used, try to do it on a rainy day. You get to test if the hood is water proof. Test the mechanism in a parking garage.

      You don’t even need to know WHY people do what they do under different circumstances. You can still take advantage of such statistics to your advantage.

      Thumb up 3 Thumb down 0
  6. Becky says:

    It also works in reverse . . . things in our PAST influence current decisions. I would never buy a convertible because it reminds me of riding in the back of a pickup when I was a kid . . . with dirt and hay, and wind tangling my hair, smelling the exhaust of the trucks on the road next to us.

    Thumb up 1 Thumb down 1
  7. Jakeness says:

    How does the weather affect sales of 4-wheel drive convertibles?

    Thumb up 3 Thumb down 1
  8. Gkm says:

    So someone that realizes they prefer the look of a home in the fall because of the pretty leaves should be made to understand they are idiots who don’t understand that it’s not fall all year round and they are making an uneconomic decision that will result in significant socials ills. Ok I get that.

    What I don’t get is how American society has come to the point where trivial research of this nature is tolerated or even notable. I think times they will be a changin however.

    Thumb up 1 Thumb down 4
    • Bjorn says:

      No, doesn’t seem like you get it. I don’t think they did this research just to tell you that you are an idiot.

      It is actually quite significant that the decision of a $30,000 investment such as a convertible car can be directly impacted by the weather. To me that shows that at a significant portion of buyers make such decision by impulse, like some women might shop for shoes or handbags. That also housing purchases, which binds the consumer for 30 years also can be decided more or less on impulse, is also quite significant. If you read the whole thing, a 20 degree increase from one day to the next caused an 8.5% increase in sales.

      Just because these topics seem like common sense, not all conventional wisdom is confirmed by statistics, often it is quite opposite.

      Well-loved. Like or Dislike: Thumb up 5 Thumb down 0