Of House and Home-Related Goods: The Home Purchase Channel of Expenditure

Home-related spending in categories such as furnishings, renovations, and repairs is tied to housing market activity, with significant implications for aggregate expenditure dynamics. We refer to this relationship as the home purchase channel of expenditure. Using household-level panel data we estimate that home purchases lead to sizable increases in home-related spending, but not to increases in goods and services unrelated to home purchase. These findings are robust to the use of close-control groups and placebo tests. We then build a heterogeneous household model with housing, home renovations, and home-related durables that is calibrated to match our household-level evidence. Model simulations of housing market shocks generate large fluctuations in home-related and total expenditure. We show that the home purchase channel amplifies aggregate expenditure dynamics, with home-related spending accounting for around half of total spending fluctuations over the housing cycle.

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Publication Details

Journal
Finance and Economics Discussion Series
Published
2025-07-01
DOI
https://doi.org/10.17016/feds.2025.045
Primary Topic
Housing, Finance, and Neoliberalism
Type
article
Field-Weighted Citation Impact
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article

Of House and Home-Related Goods: The Home Purchase Channel of Expenditure

Giovanni Favara, Geng Li, James Graham
Finance and Economics Discussion Series
Housing, Finance, and Neoliberalism
article

Of House and Home-Related Goods: The Home Purchase Channel of Expenditure

Giovanni Favara, Geng Li, James Graham
article en

Abstract

Home-related spending in categories such as furnishings, renovations, and repairs is tied to housing market activity, with significant implications for aggregate expenditure dynamics. We refer to this relationship as the home purchase channel of expenditure. Using household-level panel data we estimate that home purchases lead to sizable increases in home-related spending, but not to increases in goods and services unrelated to home purchase. These findings are robust to the use of close-control groups and placebo tests. We then build a heterogeneous household model with housing, home renovations, and home-related durables that is calibrated to match our household-level evidence. Model simulations of housing market shocks generate large fluctuations in home-related and total expenditure. We show that the home purchase channel amplifies aggregate expenditure dynamics, with home-related spending accounting for around half of total spending fluctuations over the housing cycle.

Finance and Economics Discussion Series(2025-045)
Federal Reserve (US), National Australia Bank (AU), Federal Reserve Board of Governors (US)
Openalex Percentile: Top 79%
Housing, Finance, and Neoliberalism
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Of House and Home-Related Goods: The Home Purchase Channel of Expenditure — Giovanni Favara, Geng Li, et al. · Finance and Economics Discussion Series (2025) | TGRS Research Map | TGRS