How a Home Purchase Boosts Consumer Spending

Using the Consumer Expenditure Survey (CES) data from the Bureau of Labor Statistics (BLS), NAHB Economics research shows that a home purchase triggers additional spending on appliances, furnishings, and remodeling. NAHB’s most recent estimates are based on the 2012-2014 data and show that during the first two years after closing on the house, a typical buyer of a newly-built single-family detached home spends on average $4,500 more than a similar non-moving home owner. Likewise, a buyer of an existing single-family detached home tends to spend over $4,000 more than a similar non-moving home owner, including close to $3,700 during the first year.

The NAHB analysis compares spending behavior among three groups of single-family detached home owners: buyers of new homes, buyers of existing homes and non-moving owners. Home buyers, and new home buyers in particular, tend to be larger households with children, and on average wealthier, with higher levels of education and concentrated in urban areas. Any of these factors could potentially explain higher spending on appliances, furnishings and remodeling by home buyers.

Thus, the NAHB analysis controls for the impact of household characteristics on expenditures, and, nevertheless, finds that a home purchase alters the spending behavior of homeowners and that otherwise similar homeowners spend more across all three categories compared to non-moving owners during the first two years after moving.

Looking at spending patterns of new home buyers and identical households that do not move, the differences are largest on furnishings. A typical new home buyer that buys a new home is estimated to spend almost $2,500 more on furnishings than an identical household that stays put in a house they already own.

In the same way, moving into a new home triggers higher levels of spending on appliances. A typical new home buyer that moves into a new home is estimated to spend over $1,250 more on appliances during the first year compared to a non-moving owner. In the case of property repairs and alterations the differences are smallest, $714.

Similarly, buying an older home triggers additional spending. The typical buyer of an existing home tends to spend over $4,000 more on remodeling, furnishings, and appliances compared to otherwise identical homeowners that do not move. However, in case of buying an older home, most of this extra spending goes to remodeling projects, more than $2,000, and occurs during the first year after closing on the house.

For furnishings, buyers of existing homes boost their spending by over $1,200 during the first year after moving in. The elevated level of spending on furnishings persists into the second year when old home buyers spend additional $500 over their typical budget on furnishings. In the case of appliances, buyers of existing homes outspend similar non-moving owners by $433.

The statistical analysis further shows that this higher level of spending on furnishings, appliances and property alterations is not paid by cutting spending on other items, such as entertainment, transportations, travel, food at home, restaurants meals, etc. This confirms that home buying indeed generates a wave of additional spending and activity not accounted for in the purchase price of the home alone.

NAHB’s latest research updates the 2008 study that was based on 2004-2007 data. The earlier data, collected during the housing boom, showed somewhat higher spending by home owners overall. Nevertheless, the tendency of home buyers to outspend non-moving owners on appliances, furnishings, and home improvements was similar.

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