Many factors affect changes in the housing market. Some may be related to the economy and the business cycle. A lot are based on the psyche of the actual buyers. How comfortable are potential buyers in their jobs? How confident are they with a down payment and monthly payments?
Other factors may be more personal: Are they motivated to move, aside from the strength of the economy?
The National Bureau of Economic Research, in a paper from 2012, suggests that warm weather may have a positive impact on home sales (specifically, the signing of a sales contract).
The writers argue that if the weather is warm (as it is during the summer home buying season), and the home has benefits like access to a swimming pool or air conditioning, buyers can see themselves enjoying the home on a nice day.
Similarly, during the spring and summer months, potential buyers may be more likely to feel that buying a home is worth it. Fannie Mae’s Home Purchase Sentiment Index (HPSI), a measure of how consumers feel about home buying across the year, suggests that there is some seasonable impact. The overall index (which contains six measures) and consumers’ assessment of how easy it is to buy a home are not affected greatly by weather or seasons — but there is some impact.
Specifically, there does seem to be a seasonal effect on the perceived ease of selling (as opposed to buying) a home, and how much the consumer expects homes to appreciate during the next year. As Qiang Cai, a statistician with Fannie Mae’s Economic & Strategic Research Group and co-creator of the Index, notes, “It’s normally easier to sell in the spring through the summer before the new school year starts, and winter is not a good home buying season in many parts of the country. We see some of this seasonality reflected in the HPSI.”
Days on Market Matters
Looking at how fast homes sell in different parts of the country is also useful. Reviewing Zillow days on the market data since 2014 demonstrates that inventory moves faster in warmer climates than in cooler ones. In the cooler months outside of the home buying season, Zillow homes are on the market for 16 days longer in cooler climates than in warmer climates. However, during the warmer months of home buying season, there is no meaningful difference in days on market between cooler climates and warmer ones.
Timing, Timing Timing
What does this mean for the dynamics of home buying markets, and when is the best time to buy or sell a home?
It suggests that there is an impact of weather on housing markets. However, this impact is not so much focused on actual buyers’ perceptions about the market but more about how home buyers make decisions about when to buy.
Real estate professionals may want to add “timing, timing, timing” to “location, location, location” as one of the most important considerations in real estate.
Estimates, forecasts, and other views expressed in this article should not be construed as indicating Fannie Mae’s expected results, are based on a number of assumptions and may change without notice. How this information affects Fannie Mae will depend on many factors. Neither Fannie Mae nor its Economic & Strategic Research (ESR) Group guarantees that the information in this article is accurate, current, or suitable for any particular purpose. Changes in the assumptions or underlying information could produce materially different results. The ESR Group’s views expressed in this article speak only as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.
***Article provided by Adam Korengold***
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