Weather affects home sales. This is a very straightforward conclusion that can be drawn by anyone trying to sell a home during a blizzard, hurricane or other severe weather event. If potential buyers cannot get to the house, they cannot make a decision to buy it. A flooded street ends foot traffic and destroys curb appeal.
Closely related to this is the theory that weather affects mood, and buyers in a lousy mood do not decide to buy. They may find something they like, but their natural inclination is to say “no” because of a bleak mood. This is a theory from behavioral science that has been repeatedly tested as it relates to the stock market. Obviously there is a significant financial reward for anyone who can predict an up or down day on Wall Street, and weather seems an obvious driver.
What Drives The Residential Real Estate Market?
Residential real estate investing can be very lucrative, but there is no doubt that it is difficult. In fact, the two may be very closely related. The old saying, “If it was easy everyone would do it.” certainly applies to making money on real estate investments. Fortunately, with everything else that has to be considered, real estate investors can rest assured that it is rare for any deal or project to go down the tubes because of the weather.
The simple fact is that there are so many factors which impact the value and strength of the real estate market that weather is simply not a contributing factor. The studies on weather and the stock market have been inconclusive. A potential buyer who does not come out because it is raining will come out 24 hours later when the rain lets up.
The fact is that residential real estate buyers are brought to the market for a variety of reasons, none of which have anything to do with the weather. They set aside time based on work and activity schedules and look at houses at these pre-determined times. The blog post linked at the start of this article blamed rain in Seattle for low traffic at the property. If people in Seattle stayed inside when it rained they would never come outside.
Home Sales Indicate Real Estate Investors Are Still Active
The National Association of Realtors (NAR) reports that home sales fell in August to an adjusted low of 5.35 million homes. This is down 1.7% from the previous month. However, the primary factor they cite is the continued lack of supply in the market. Incidentally, the NAR report says cash deals still account for about 20% of the market, up from the previous month but down slightly from this time last year. This indicates real estate investors are still very active in this market.
Of course, all real estate is local, and all weather is local too. We may commiserate with folks in Houston or Florida, but it is the weather outside our own windows that impacts our behavior. This means that a blizzard or hurricane will impact the real estate market in that location for a period of time. But eventually the streets get plowed and the storm damaged is cleared away. Business, and life, tends to get back to normal fairly quickly.
Cause and effect is often very difficult to see amid the clutter and influence of different factors. In fact, it is so easy to draw wrong conclusions between two items that there is a fallacy in logic that covers this practice. Real estate investors do well to avoid this when it comes to weather and stick to the fundamentals when buying or trying to sell a piece of residential real estate.