What Do Home Buyers Buy after Moving

October 17, 2013

In a post last week we discussed NAHB research showing how during the first two years after closing on a home sale, home buyers tend to spend money on furnishings, appliances and remodeling considerably more compared to non-moving owners. Buyers of new homes spend most, outspending non-movers by a factor of 2.8. Buyers of existing homes spend twice as much as non-moving owners. This post reveals particular items that are most popular with home buyers and helps explain changes in their spending behavior triggered by a house purchase.

The NAHB analysis of the Consumer Expenditure Survey (CES) data from the Bureau of Labor Statistics shows that the biggest outlay in the budget of new home buyers is furnishings. They spend $5,288 on furnishings during the first year after buying home, outspending buyers of existing homes 2.2 times and non-moving owners 5.3 times. Average spending is estimated for all households in the group regardless whether they purchased a certain item or not. Thus, higher averages may point to larger and/or more frequent spending by the group.

Single-Family Detached Home Owners’ Average Annual Spending on Various Items, 2007$

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The biggest ticket item for all home owners is bedroom furnishings, including mattresses. However, buyers of new homes spend twice as much on this item as existing home buyers and outspend non-moving owners six times.  This is not surprising considering that the number of bedrooms in new single-family detached homes has been on the rise.

The second largest furnishings outlay for home buyers is sofas. New home buyers spend on average $746 during the first year after moving, more than double of what existing home buyers spend, and more than six times the amount spent on sofas by non-moving owners.

The differences are even larger when comparing spending on window coverings. New homebuyers outspend existing home buyers 7.7 times and non-moving owners 24.7 times.

New home buyers also outspend non-moving owners on every single appliance listed in the CES. They also tend to outspend existing home buyers across almost the entire range of appliances. The few exceptions include lawnmowers, gas stoves, built-in dishwashers, and some other miscellaneous appliances. The high level of spending by new home buyers may seem surprising considering that many new homes come with installed appliances, but the data suggest that these purchases are nevertheless more frequent among these households.

New home buyers spend the most on televisions, refrigerators, clothes washers/dryers, and computer systems – items that are less likely to be included in the purchase of a new home. The most expensive appliances in the budget of existing home owners are clothes washers/dryers, refrigerators, and lawnmowers.

Somewhat surprising, new home buyers spend almost as much as buyers of existing homes and outspend non-moving owners on property alterations and repairs. However, the specific types of remodeling projects are quite different across the groups. As expected, buyers of existing homes and non-moving owners spend more on various repairs and replacements. As a matter of fact, existing home buyers spend more than new home buyers on every single item the CES lists as a repair or replacement. They also outspend new home buyers on kitchen/bathroom addition or remodeling, and purchasing and installing new items such as HVAC, plumbing, electrical and security systems, paneling, flooring, siding, windows and doors.

However, when it comes to outside additions and alterations, including additions of patios, terraces, new driveways, and fences, new home buyers outspend existing home buyers and non-moving owners by far. There are several items where non-moving owners outspend homebuyers, including addition of detached garage, repairs of driveway/walk, siding/roofing, replacements and repairs of doors and windows.


The Ripple Effect of Home Buying

October 9, 2013

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. Such spending typically exceeds that of non-moving home owners and persists for two years after moving.

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. During the first two years after closing on the house home buyers tend to spend on appliances, furnishings and property alterations considerably more compared to non-moving owners. However, home buyers 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. Ripple_blog1

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 in excess of $3,000 more on furnishings than an identical household that stays put in a house they already own. The elevated level of spending persists into the second year as new home buyers spend additional $2,000 over their typical budget on furnishings.

Similarly, 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 $1,005 more on appliances during the first year compared to a non-moving owner. The difference shrinks to $348 during the second year and goes away after that.

In the case of property repairs and alterations the differences are smallest, $740, and last only one year, which is not surprising considering that most households would not want to spend years in a house with ongoing remodeling projects.

Buying an older home also triggers additional spending. The typical buyer of an existing home tends to spend close to $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. Only the additional spending on furnishings tends to persist beyond the first year.

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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.

In summary, the NAHB analysis shows that during the first two years after closing on the house a typical buyer of a new single-family detached home tends to spend on average $7,400 more than a similar home owner who does not move, including $4,900 in the first year after purchase.  Likewise, a buyer of an existing single-family detached home tends to spend about $4,000 more than a similar non-moving home owner, including $3,600 during the first year. The overall ripple effect of home buying does not stop here, as producers of appliances, furnishings and remodelers spend their additional income paid by home buyers and trigger further waves of economic activity.