Ongoing supply and affordability challenges in the housing market have frustrated many homeowners who have looked to trade up or relocate for various reasons. In response, some consumers have turned to renovation projects to meet their needs.
According to survey data released this week by St. Louis-based Clever Real Estate, 63% of homeowners would rather remodel their current home than move to one that has already been fixed up. There’s a variety of reasons for choosing this option, but the most commonly cited were to repair damage (35% of respondents), to increase comfort (35%), to improve the livability of the home (32%) and to enhance the home’s aesthetic appeal.
The market for renovation projects is a lucrative one for homebuilders and contractors. Although consumers have been spending less on these projects for about two years, estimates from the Joint Center for Housing Studies (JCHS) of Harvard University show that about $450 billion will be spent this year to spruce up owner-occupied homes. That figure is projected to rise slightly next year.
Mortgage lenders can also benefit from these projects through a variety of products, including home equity lines of credit (HELOCs). The Clever survey found that 85% of respondents spent at least $5,000 on renovations in 2023, including 37% who spent at least $10,000. In line with the JCHS estimates, these shares are expected to rise in 2025.
While 45% of surveyed homeowners said their renovation plans are tied to wants rather than needs, there are financial challenges associated with many projects. About one in four respondents who recently completed a renovation said that “budget constraints” was their top challenge. Nearly 80% exceeded their budget on their previous project and 41% saw significant delays.
About two-thirds of these homeowners have taken on debt to pay for a project, and about one-third have borrowed at least $10,000 in the process. And much of this debt was tied to high-interest credit cards, which 36% of respondents said they struggled to repay.
The vast amount of home equity accumulated across the country could be a path to addressing these issues. Data from ICE Mortgage Technology found that tappable home equity — the amount that a homeowner can draw from while keeping a 20% equity stake — rose to a record $17.6 trillion at the midpoint of the year. And there are now 32 million borrowers who have at least $100,000 in tappable equity.
Keynova Group recently surveyed 12 large banks and nonbanks about their home equity lending capabilities. Speed is a key part of this process. Nearly all of them reported having a digital application process, while two advertised the ability to fund a home equity loan within a week.
