As mortgage rates are locking homeowners in their current houses, many are investing in renovations rather than moving.
A new survey from LendingTree found that 68% of homeowners started or completed a home improvement project in the last 12 months, while 63% plan to begin one in the next year.
Interior painting, landscaping, and bathroom remodeling are the most common projects, but homeowners have diverse reasons for renovating. Of the more than 2,000 respondents, 36% say they need the repairs because their house is aging, 27% say their improvements are relatively small, and 21% say they want to spruce up their home to sell.
Millennials homeowners are poised to take on the most DIY, with 78% engaged in renovation in the last year and 72% planning to this year.
“While there are certainly well-off millennials, members of the generation typically don’t have much wealth compared to their older peers. Owing to this, the only homes that some can afford might be fixer-uppers,” LendingTree senior economist Jacob Channel said of the Millennial reno boom.
“Also, millennials may just have more energy to spend on home improvement projects than their older peers.”
They’re also the biggest home-selling cohort, with nearly 30% saying that is the reason for their projects.
Notably, many respondents said they are paying for these projects with their savings.
Only 2% of homeowners who’ve started or completed improvement projects in the past 12 months are financing them with a home equity loan, and 3% with a HELOC.
House-rich Americans are sitting on nearly $30 million in untapped home equity, or $200,000 cash per household. The average equity loan amount offered to homeowners is $104,102.
“Americans are sitting on a ton of home equity right now, so there are plenty of opportunities for homeowners to tap into their equity to pay for a big project,” Channel noted. “The biggest benefit of a home equity loan is that it can help owners access more cash than they would if they relied solely on their savings.”
But many don’t understand the process to utilize their home equity, while others are scared off by interest rates. Homeowners withdrew half of much equity in Q2 2023, when rates were in the 6-7%s, as in 2022, which started the year with rates near 0%.
Lenders can access new opportunities by helping homeowners understand the benefits of paying for renovations with their equity.
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