Study Calculates Direct and Indirect Expenditures Related to an Illinois Home Sale
When a family or individual purchases a home, there are direct and indirect ripple effects in the state and local economies. With any home purchase, there is more to the buyer’s and seller’s expenditures than the mortgage payment and closing costs. There are fix-up costs and replacement of household items, moving expenses and the purchase of new furniture just to name a few. None of these expenditures would take place if it were not for the sale and purchase of a home.
The Illinois Association of REALTORS® wanted to look closely at this—just how much is spent by the seller and the buyer in the average Illinois home sale? Using Advocacy Program funds, IAR commissioned a study to examine the expenses that buyers and sellers incurred in conjunction with the purchase of an average priced home in Illinois in 2010. The study further reviews the direct and indirect economic results of these expenditures made by a seller and a buyer in a single residential transaction.
Part II of the study analyzes the direct and indirect expenditures for 11 regional MSAs (metropolitan statistical areas). The studies will be used to promote the economic importance of the Illinois housing market in IAR dealings with leaders in local and state government.
Ripple Effects – or multiplier effect: How money spent in one industry goes to other industries which in turn is spent in various other industries, and so forth.
The research really underscores the importance of the housing market on the health of the overall Illinois economy.
For the study RCF Economic and Financial Consulting (RCF) surveyed 415 recent buyers and sellers of existing homes (no new construction), as well as a survey of title companies, research reports other data sources. IAR homes sales data was used for the one-year period 4Q09 to 3Q10. An input-output model developed by the University of Illinois Regional Economics Applications Laboratory (REAL) was used to quantify the “ripple effects” or multiplier effect on the economy (how money spent in one industry goes to other industries which is spent in various other industries). The homebuyer/seller survey was sent to people identified in county recorder of deeds offices as the new owners of homes transacted within the previous 12 months.
Fact Sheets (pdf)