Here¬ís How Much You¬íll Spend After Buying Your New House...
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.