Curb appeal: how temporary weather patterns affect house prices

For decades, economists have examined the myriad variables that affect real estate value, from individual house characteristics to neighborhood amenities. Yet one variable, weather, has attracted little attention thus far. This is true despite widespread agreement that much of a home’s value rests on curb appeal, or how a home looks from the street, which could significantly change based on weather. Given that housing stock is the main store of wealth for many households, it is important to understand what impact climate can have on asset value. I utilize a large data set that comprises 185,000 sales of 96,000 single-family homes to ascertain the effect of various weather conditions on house prices. By using a fixed effects framework that isolates intra-property price changes, time-invariant omitted variable bias is accounted for, and the causal effect of weather on home prices can plausibly be determined. In the winter, the results indicate cold weather is associated with an increase in price. In the summer, precipitation affects price, but the sign and magnitude of the impact depend on the temperature. The magnitudes are small but highly statistically significant. These results show that home buyers and sellers are affected by temporary weather conditions.