Home sweet spending

Typically, buying a home is just the first step in opening up the purse strings, albeit the biggest.

Home buying generally generates a wave of activity as the new owners spend money on improving their homes -- and buying new items for them, says a recent analysis of new homebuyers by the National Association of Home Builders in the U.S.

"Buying and moving into a home is one of the most important financial decisions households make," says the NAHB report. "It is therefore not surprising that NAHB's analysis shows that a home purchase triggers a series of additional spending on appliances, furnishings and remodelling activities that exceed typical spending levels of non-moving owners and persist for two years after moving." Specifically, 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 US more than a similar homeowner 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 homeowner, including $3,600 during the first year.

The biggest outlay in the budget of new homebuyers is furnishings.

They spend $5,288 on furnishings during the first year after buying a home, outspending buyers of existing homes 2.2 times and non-moving owners 5.3 times. The differences are not only largest, but also most consistent when comparing expenditures on furnishings.

Compared with non-moving owners, buyers of new homes outspend existing homebuyers on nearly all furnishing items with the exception of non- permanent floor coverings and replacement of wall-to-wall carpeting.

The biggest-ticket item for all households is bedroom furnishings, including mattresses.

However, buyers of new homes spend on this item twice as much as existing homebuyers and outspend non-moving owners by six times.

"This is not surprising considering that the number of bedrooms in new single-family detached homes has been on the rise. In 2007, three-, four- and more-bedroom houses accounted for 88 per cent of all new single-family detached homes compared to only 75 per cent in 1985, according to the US Census Bureau." The second-largest furnishings outlay for homebuyers is sofas. Buyers of new homes spend $746 during the first year after moving, more than double what existing homebuyers 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. Buyers of new homes outspend buyers of existing homes by 7.7 times ($672 compared with $87) and non-moving owners (with an average annual spending on window covering of $27) 24.7 times.

Total appliance spending is highest for buyers of new homes, $2,769, compared with $1,919 for buyers of existing homes, and $1,065 for non-moving owners.

Buyers of new homes tend to outspend buyers of existing homes across almost the entire range of appliances, with a few exceptions: lawn mowers, 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 suggests that these purchases are nevertheless more frequent among these households," says the study.

The Builder Practices Survey conducted by NAHB Research Center shows that only 30 per cent of new homes built in 2007 in the U.S. came with clothes washers and dryers and around 55 per cent had installed refrigerators.

Buyers of new homes spend the most on televisions, refrigerators, clothes washers/dryers, and computer systems -- items that are less likely to be included in the price of new homes.

The most expensive appliances in the budget of existing homeowners are clothes washers/dryers, refrigerators and lawn mowers.

Buyers of existing homes spend $4,642 on property alterations and repairs, compared with $4,275 spent by new homebuyers, and $2,413 spent by non- moving owners "Considering that new-home buyers move into new homes, it might look surprising that they spend almost as much on property alterations and repairs as buyers of existing homes, but the specific types of remodelling projects are quite different across the groups," says the report.

"As expected, buyers of existing homes and non-moving owners spend more on various repairs and replacements.

As a matter of fact, existing homebuyers spend more than new-homebuyers on kitchen/bathroom additions or remodelling, and purchasing and installing new items such as HVAC (heating, ventilation and air conditioning), plumbing, electrical and security systems, panelling, flooring, siding, windows and doors.

"However, when it comes to outside additions and alterations, including addition of patio, terrace, new driveway, fence, 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 garages, repairs of driveway/walk, siding/ roofing, replacements and repairs of doors and windows."

(prepared by Kathy McCormick/Edmonton Journal)