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The Ripple Effect of Home Buying

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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.

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.

View this original post on NAHB’s Eye on Housing blog.

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