Don’t buy a convertible just because it’s sunny now

Psychologists have long been aware of a curious phenomenon known as “projection bias.” We tend to think the future will resemble the present more closely than it actually does.

So, for example, studies have found that shoppers who buy groceries for the week on an empty stomach tend to buy far more food (and more junk food) than they end up needing. When you’re hungry, you expect you’ll always want a lot of food.

But it turns out that projection bias can be surprisingly pervasive and affects even massive purchases. A new paper by the National Bureau of Economic Research finds that abnormal weather can dramatically shape our car- and home-buying habits.

People are far more likely to buy vehicles with four-wheel drive when it’s snowing, or overvalue homes with swimming pools when the sun is scorching, and often end up lamenting the purchases later.

The economists, Meghan Busse, Devin Pope, Jaren Pope and Jorge Silva-Risso, pored through data from 40 million vehicle sales and 4 million housing sales. They found that weather can have a sweeping effect.

Take car sales: If the weather is 20 degrees warmer than the seasonal average, sales of convertibles shoot up 8.5 percent. (The authors control for climate and region.)

A bright day with clear skies will reduce the number of black-colored vehicles sold. Conversely, when it’s snowing, sales of rugged vehicles with four-wheel drive shoot up.

OK, no big deal, right? Except, as the economists found, many people end up later regretting their weather-influenced buys.

“A vehicle is more likely to be returned quickly,” the authors note, “when purchased on a day with abnormal weather — evidence in favor of projection bias.”

A similar bias occurs with houses. Buying a house is a major endeavor, one in which we’d expect the buyer to carefully weigh the pros and cons of every feature and facet.

And yet, the paper finds, seasonal differences and weather can greatly sway this decision. A swimming pool adds, on average, $1,600 more to a house’s value during the summer than it does during the winter. The same goes for central air conditioning.

Buyers don’t find a pool nearly as attractive when they’re making decisions in the winter. They have different ideas about how often the pool will be used, or how enjoyable swimming might be, than they do when house-hunting in the summer. It’s hard to imagine a future that’s significantly different from the present.

“Many of the most important decisions that we make in life,” the authors note, “involve predicting our future preferences.”

More in Herald Business Journal

Stan Jones (left) father of Vice Chairwoman Teri Gobin, gets a handshake from Jared Parks while Herman Williams Sr. hugs Bonnie Juneau (right) after the Tulalip Tribes and Quil Ceda Creek Casino held a groundbreaking ceremony for the new Quil Ceda Creek Casino Hotel on Tuesday at the Tulalip Reservation. The casino hotel will be built on 16 acres of ancestral tribal land and will feature a main casino that will showcase as many as 1,500 slot machines. (Andy Bronson / The Herald)
Tulalips break ground on new Quil Ceda Creek Casino Hotel

A 150-room hotel was added to what is now a $140 million project in Tulalip.

Teddy, an English bulldog, models Zentek Clothing’s heat regulating dog jacket. (Ian Terry / The Herald)
Everett clothing company keeps your dog cool and stylish

Zentek uses space-age fabrics to moderate the temperature of pets and now humans.

Trudeau snubs Boeing, unveils plan to buy used Aussie jets

Trudeau will be assessing the impact fighter jet contracts have on his country’s economy.

Boeing raises dividend 20%, continues stock buyback program

The manufacturer said it has repurchased $9.2 billion worth of its shares this year.

Everett engineers learn lessons from Mexico City catastrophe

Structural scientists went to help after the September earthquake there and studied the damage.

Providence Hospital in Everett at sunset Monday night. Officials Providence St. Joseph Health Ascension Health reportedly are discussing a merger that would create a chain of hospitals, including Providence Regional Medical Center Everett, plus clinics and medical care centers in 26 states spanning both coasts. (Kevin Clark / The Daily Herald)
Merger would make Providence part of health care behemoth

Providence St. Joseph Health and Ascension Health are said to be talking. Swedish would also be affected.

Hospital companies merge as insurers encroach on their turf

An anticipated deal between Providence St. Joseph Health and Ascension is only the latest.

DaVita to sell off medical groups including The Everett Clinic

Another round of health care consolidation means The Everett Clinic could soon get new ownership.

Engine trouble hits Air New Zealand’s 787 Dreamliners

A Rolls-Royce engine was shut down and was afterward found to be seriously damaged.

Most Read