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Whither the Weather

The weather is getting a lot of attention for driving the pending results in December.  As an agent, you know how snow can keep you and buyers from home showings, but how do we know that the weather was responsible for the slip in contract signings as opposed to other market forces and what does it mean for sales in the months ahead?  While the December pending home sales figures signal notably weaker home sales figures in January and February, the next few months of data will be better indicators of the 2014 housing market.

Winter Weather: 2012 vs 2013

How abnormal was winter 2013?  These two pictures from snow analysis done by the National Operational Hydrologic Remote Sensing Center show a snowier early-December 2013 versus 2012.

It was colder, too.  The National Oceanic and Atmospheric Administration keeps information on temperatures that necessitate heat use called “heating degree days”.  While December 2013 was nearly normal, it was significantly colder than December 2012.  This pattern continued with January 2014 having nearly 144 more heating degree days than January 2013.

Seasonal Adjustment and Winter Sales

Housing data is seasonally adjusted to smooth out the fluctuations we know exist from month to month.  For example, many families with school-aged children choose to buy and sell homes during the spring and summer so as to minimize disruption to children during the school year.  However, these fluctuations are not uniform and the efforts to smooth are based on estimates of typical monthly patterns than can be revised.  A review of past factors suggests that a seasonal revision to an extreme historical value could raise the December Pending Home Sales Index estimate for the US by as much as 5 percent or lower it by as much as 2 percent, though the actual revision is likely to be only a percent or two higher.

Non-seasonal Potential Sources of Weakness

The housing market is entering an interesting year.  After record price gains in 2013 and near-record gains in sales many factors could cause slower growth in sales and prices for 2014: implementation of Qualified Mortgage rules that could curtail access to financing, uncertainty over government policy such as tax rules for short sales and flood insurance rates, a relative affordability crunch as the rapid rise in prices has outpaced income growth making homes affordable but much less affordable than they had been in recent years.  These factors could be offset by an improving economy generating jobs for potential homebuyers.  However, if job creation slows, this momentum will carry over into housing.

Right now, NAR’s forecast calls for sales to be roughly the same in 2014 as in 2013—slightly below the record year.  However, after months of payroll job gains near or above 200,000, December’s job gains figure was a surprise on the low end.  The months ahead will reveal whether the weak payroll figures and pending home sales figures are seasonal blips, or a sign of a broader weakening.

For market analysts looking for a fuller discussion of how the transaction process can be affected by weather and more weather data, see the longer post here: <link>.

Danielle Hale, Director of Housing Statistics

As a Research Economist at NAR, Danielle studies tax issues, the wealth impact of home ownership, and different measures of home prices.

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Comments
  1. The weather definitely played a factor in slips in contract signings/offers being present to sellers, people don’t even want to leave their homes with all of the blizzards that have occurred in Chicago this year.

  2. Faye Bailey

    Very informative article. Enjoyed the read!

  3. I find it absolutely absurd that an agent–supposedly acting within the best interests of their client–would refuse to show a house or present an offer due to weather conditions. It seems as if the market needs younger, more “hungry” salespersons/brokers that are willing to do whatever it takes. I’ve even heard of buyers losing opportunities on investment properties because their agent was leary of leaving their home due to cold temperatures or snow. Absurd. I would gladly represent those clients that have suffered such setbacks on behalf of their agents. Born and raised in WI, never could I foresee any amount of snow or any temperature too low, that would significantly impact my ability to close on a deal.

  4. Just another reason why I love living in Tampa! I think we’ve endured a whole 6 or 7 days of winter this year… and by winter, I mean it dipped below 50 degrees. :)