Home Buying: A Gateway Purchase

Home purchases are the trigger to a wealth of other spending, according to the newly National Association of Home Builders (NAHB) analysis of Consumer Expenditure Survey from the U.S. Bureau of Labor Statistics.

The research shows that the buyer of a newly built single family home will typically buy an additional $4,700 on furnishings ($2,500), appliances ($1,250), property repairs ($714), and other purchases in the first two years after buying a house than the homeowner who stays in an home he or she already owns.

It’s not just buyers of new homes who spend money on related costs, the NAHB research shows. People buying an older home will typically spend another $4,000, than a non-moving homeowner. The additional money is typically used for remodeling, home furnishings, and appliances. Remodeling typically accounts for about half of the additional spending, most of that in the first year after closing on a newly purchased domicile. Furnishings, on average, accounted for $1,200 of the additional spending, and appliances accounted for a little more than an additional $400.

Buyers of both types of single-family homes tend to be larger, wealthier households than homeowners who stay put, according to the NAHB. Additionally, the buyers are typically better educated and tend to be concentrated in urban areas.

The NAHB survey says that the additional spending doesn’t detract from spending on non-home related items. People moving into newly built or older single-family houses typically don’t cut back their spending on entertainment, transportation, travel, groceries, restaurants, and other items.

The NAHB research controlled for differences in household characteristics. The study updated similar research conducted in 2008. That study, based on research collected during the housing boom, also showed higher spending by people who bought new or existing properties, with much of the additional spending on appliances, remodeling, and home furnishings.