Did the polar vortex freeze US housing sales this year? King Solomon’s Proverbs frequently use the natural world to illustrate lessons for humans, so it shouldn’t be too surprising that this winter’s harsh weather could have a cooling effect on housing in the hard hit East Coast and Midwest. Although other factors contributed to an overall slowdown in the market for January 2014, the string of severe winter storms appear to have played a major part in stalling home purchases.
For people living in the East and Midwest, the New Year brought a series of extreme winter storms that walloped the area with subfreezing temperatures, snow and ice storms. With names like Cleon and Boreas after figures in Greek and Roman mythology, these weather fronts scooped up polar air and whipped it with high winds to create a “polar vortex” that was even visible from space. These storms changed every aspect of life in the affected areas, so it’s no surprise that they could put a dent in the housing recovery too.
Sales of existing homes fell in January 2014 to levels not seen in over a year, and experts say weather most likely played a significant role in the slowdown in some areas. It’s not the first time that weather has had an effect on housing – a similar situation followed the “Super storm” Sandy of a couple of years ago as well.
The unusually cold weather –this past January was the coldest since 1994 – also contributed to a slowdown in other economic sectors such as employment. And that also has a direct impact on the housing recovery and the ability of buyers to qualify for and sustain a mortgage.
But the hard-hit East Coast wasn’t the only area to see a slowdown in housing sales – and that means other factors such as higher mortgage rates and tighter standards for borrowing also contributed to a slow period. And in some areas, the supply of available properties also hit levels not seen in the past year as well.
Is the slowdown temporary? It’s too soon to say. The Federal Reserve is going forward with its plans to taper down its stimulus plan – a hint that they don’t see the current situation as permanent. And conditions are different in various areas of he country, where weather wasn’t a major factor in the equation.
But the stats emerging after the January freeze give even more weight to Jason Hartman’s Commandment for Successful Investing: “Thou shalt diversify.” Wise investors who want to build wealth need to spread holdings over as many markets as possible. Buying properties in more than one market offers some protection if a market is hard hit by storms, economic downturns or other factors.
Diversifying outside an investor’s local markets also opens doors to new opportunities in places where the factors stat affect market slowdowns are less of an issue – winter storm warnings aren’t as likely to affect the housing inventory in the West, for example, And those other factors, too, may play a different role.
Cleon and his friends may play their own part in a temporary housing slowdown. But smart investors can soften the blow – and the effects of other factors too – by following Jason Hartman’s advice to cast a wider net for profitable income properties. (Top image: Flickr/merfam)
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The Solomon Success Team