An empirical analysis of the local weathers’ effect on dwelling prices

Abstract

Intuition and psychological evidence predict that pleasant weather is associated with an upbeat mood, and empirical research demonstrates that mood influences decision-making. This thesis investigates the effect of local weather on the selling price of dwellings sold in Oslo. The observed weather at the hour of the house viewing and auction are used to examine if potential homebuyers’ moods are affected to such an extent that it changes the sales price. We find that the weather has systematically altered dwelling sales prices in Oslo, and the results are significant both statistically and economically. The granularity of the weather and housing data combined with the model specification allows us to claim a causal relationship between local weather and dwelling prices. Keywords: Behavioral finance, real estate pricing, hedonic model, rationality, mood, weather. JEL Classification: G41, R31.