Without a doubt—whether it’s the first time or the fourth, buying a home is an exciting time. A new location, four new walls to settle into, what’s there not to look forward to? But aside from required expenses, such as closing costs, taxes, and necessary repairs, many homebuyers are making the mistake of overspending after closing.
According to a recent study released by the National Bureau of Economic Research (NBER) and reported on [1] by MarketWatch, homeowners spend on average about $5,000 extra after they move in, an effort to make their house feel more like a home. That figure, unsurprisingly, drops for second- and investment- homes to $3,700.
NBER’s study analyzed the spending habits of 70,000 households from 2001 to 2013, and found that many people would unnecessarily replace working appliances in order to fit particular aesthetics.
Sometimes referred to as New Couch Syndrome, buyers will frequently buy new furniture or kitchenware under the premise that a new house requires new things. Or to accommodate the fact that the buyer has upgraded, and they need to furnish additional bedrooms that they didn’t have before, often by financing instead of buying used. In fact, home-related expenses usually begin accruing three months before closing and continue well into a year afterward.
The study also found that homebuyers under 35 and lower income households—those with a median annual household income below $57,000—spend more on home related costs than older or more affluent households. This statistic is attributed to the fact that may first-time homebuyers, who are younger, purchase houses that need more work than wealthier buyers.
But buyers are also making other mistakes when they move into a new house. There is a tendency to make home improvements without considering the return on investment, such as upgrading windows without considering the market value. Unnecessary remodeling after move-in time is also something that homebuyers jump the gun on.