This spring is shaping up to be the busiest housing market we’ve seen since 2006. Now, thanks to America’s favorite rodent, we can predict that this year’s strong spring housing market will start sooner than normal.
God bless you, Groundhog Day! When the country is so over winter, all eyes turn to one famous groundhog, Pennsylvania’s Punxsutawney Phil (sorry, Staten Island Chuck!), and await his prediction on the advent of spring.
But just how accurate is our pal Phil? I pulled the history of his forecasts and aligned them with historical weather data. The combination that gave me the most overlap and seemed a reasonable test of an early spring was to look at the average temperature in February for the contiguous 48 states as recorded by the National Climatic Data Center.
If Phil sees his shadow on Feb. 2, Groundhog Day, tradition holds, winter will last six more weeks. Logically, that would also mean that February should be average or colder than average. If no shadow is seen, spring will come earlier, and February should be warmer than average.
I assembled the February temperature data back to 1921, and found that the average February was 34 degrees Fahrenheit.
When you look at Phil’s annual predictions, you quickly see that notseeing a shadow—as happened on Tuesday—is a rare event. Over the past 95 years through 2015, Phil has been recorded as saying he didn’t see his shadow only 14 times.
OK, so let’s say that Phil is on the money this year. Given this year’s “no shadow” report, we’re likely to have a warmer February. Now, what does that mean for the housing market?
Over the 47 years for which we have sales data, when February’s temperature was above average, February home sales showed growth over the prior year 60% of the time. The reverse scenario does not hold out: When February temperatures are below average, there’s still a greater than 50% chance that home sales will be at least average.
Why is that? Temperature and weather are merely catalysts for what happens in the month of February. What matters more than weather is the health of the economy and the underlying demand for housing. When the market is strong and temperatures are cold, we still typically see growth. But when we have a strong market and warmer temperatures in February, we are far more likely to see growth.
Put another way, when housing is poised for a strong year, and February has above average temperatures, we see very strong growth in February sales more than 90% of the time.
That’s what I am taking away from Phil’s forecast for 2016. When the housing market is strong like it is now, and Phil doesn’t see his shadow, February sees an average 11% year-over-year increase in existing-home sales.