Here’s How Much You’ll Spend After Buying Your New House...

July 20, 2017

How much does it cost to turn a house into a home? About $5,000 on top of the purchase price, according to a study distributed Monday by the National Bureau of Economic Research, a Cambridge, Mass.-based research group. 

Buying  a house triggered that much on average in spending on home renovations  and durable home goods such as kitchen appliances, according to research  by economists Efraim Benmelech, Adam Guren and Brian Melzer. 

Home  buyers embarked on the wave of spending even after buying a house that  was newly constructed, suggesting that it was driven in part by a new  owner’s desire to tailor his or her new house to their tastes, said  study co-author Ephraim Benmelech, director of the Guthrie Center for  Real Estate Research at Northwestern University’s Kellogg School of  Management. 

The study analyzed spending by 70,000 households from  2001 to 2013 and building permits for nine million properties. (Such  spending flagged significantly during the housing crisis, helping to  fuel the Great Recession, the researchers found.) 

“People  may move into a house with all new appliances but may not like how they  fit with the décor, so they’ll replace them,” Benmelech told  MarketWatch. “Factor in the fact you might be moving to a new house, but  there’s a good chance you may not like what’s in the house and you may  end up changing it.” 

Home buyers  increased their spending on home-related expenses starting three months  before the home purchase and for a year afterward, with spending peaking  during the month right after home purchase, according to the study. The  $5,000 is the figure for primary residences; the average amount of  spending is $3,700 when second homes and investment properties are  included. 

Younger home buyers (35 and under) and lower-income  buyers (households making below a median household income of $57,000 for  a family of 2.63) tended to spend more on home-related costs than  older, wealthier households, the study found. That could be because  younger, less wealthy home buyers bought houses that needed more work,  Benmelech said. 

The more bedrooms a house had, the more the new  owner spent on durable home goods and home improvements. Perhaps that’s  some consolation for homeowners who regret not buying a bigger house. A  recent survey of home buyers found that buying too small of a house was the No. 1 regret buyers had. 

A recent discussion on Reddit highlighted some of the often unexpected expenses homeowners encounter after they move in.  

“I’ve  successfully budgeted moves to new places as a renter, but moving to a  new house that I own has been an endeavor that has completely blown my  budget in a truly epic way,” wrote a Reddit poster who recently moved  into an older (1920), but renovated house considered to be “move-in  ready.” 

The poster said he or she ended up paying for a slew of  surprise costs, including a plumber to investigate leaks and an engineer  to look at a “scary crack” on a detached garage. 

Unexpected  expenses like those are one reason another Reddit commenter said he was  glad he set aside some cash that he originally thought would be part of  his down payment. He ended up with a bigger mortgage, but had cash at  the ready to pay for leaky windows and roof repairs. “Without that extra  dough we had on hand we’d have had to go pretty seriously into debt to  cover those repairs,” the commenter said.