How Weather Influences Life's Big Spending Decisions
NEW YORK (MainStreet) -- For the sake of argument, let's say you have a fleet of vehicles and want to clear some space in your five-car garage. What should you sell first? The vehicle with the highest mileage or the lowest? The gas-guzzler or the hybrid? Last year's model or the classic?
How about the one that fits the weather pattern?
It probably doesn't come as a surprise that convertibles sell better in the spring than in the dead of winter, or that small-engine cars move faster when gas prices spike. Now there's academic research to support and even quantify the effects weather has on the sales process.
Convertibles don't just sell better in warm weather. Specifically, a 20-degree increase in temperature spurs an 8.5% increase in convertible sales, according to Jorge Silva-Risso, an associate professor of marketing at the University of California's Riverside's School of Business Administration.Silva-Risso and his co-authors find that the same 20-degree temperature spike causes a 2.1% drop in the number of black vehicles sold, while a shift from cloudy to clear weather reduces black vehicle sales by 5.6%. Similarly, a 6% increase in sales of four-wheel-drive vehicles follows a 10-inch snowfall. Finally, if you invested in an expensive swimming pool, wait until the summer to sell: a home with a swimming pool will sell for $1,600 more, on average, in the summer versus the winter. The research in the UC Riverside study is predicated on a process known as "projection bias," which provides opportunities for sellers and serves as a caution to buyers. "Projection bias refers to the tendency to over-predict the degree to which future tastes will resemble current tastes," says a university explanation of the research. "For example, the popular adage 'Never shop on an empty stomach' is a caution against projection bias: consumers are likely to over-predict the degree their future selves will appreciate the purchases that their current selves crave." The vehicle research looked at data from more than 40 million new and used vehicle sales, about 20% of the total from 2001 through 2008. The housing data included four million sales of single-family homes from 1998 through 2008. Does the study indicate that tracking the 5-day forecast is more important than Kelley's Blue Book for cars or Case-Shiller and Zillow for home prices? In general, a savvy seller can profit on shoppers' projection bias. That's why car dealers do all they can to ink a contract while you're pumped up over a test drive. Sleep on it and you're much more likely to have second thoughts -- and be glad you did. The authors cite the value of cooling-off periods for certain purchases. Some laws, for instance, give buyers time to change their minds after high-pressure door-to-door sales. But since the government can't protect us from ourselves all the time, buyers would be wise to impose their own cooling-off periods, waiting a day or so before committing to expensive, emotion-laden purchases. So next time the temperature rises and the Mercedes convertible looks like a steal or the in-ground swimming pool that is "easily worth $20,000" is being offered to you as "practically a throw-in," cool off for a little while. That goes for just about all of life's big decisions, the authors of the UC Riverside study suggest, including marriage, switching jobs and having a baby. More on home and car sales:
What's your home worth?
Why you should buy a small car.
What's new with used car values? By Jeff Brown Follow TheStreet on Twitter and become a fan on Facebook.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV