Rising home values is the primary reason why nearly eight in 10 homeowners would rather renovate than move, according to a Discover Home Loans survey.
While the pricey market has kept many from searching for another place to live, it’s a benefit for those looking to make improvements on where they are now.
Another reason cited — one that is not mutually exclusive from rising values — is the inventory shortage.
"With tappable home equity on the rise, now is the time for homeowners to finance their home improvements with a home equity loan and ultimately, stay in the homes they love long-term," Rob Cook, vice president of marketing, digital and analytics at Discover Home Loans, said in a press release.
Among those planning to renovate, 27% said it would allow them to better personalize their home. A similar share — at just one percentage point less, 26% — said it would be less expensive than buying a home.
And 21% responded that it would give them a sense of accomplishment, while 9% cited the stress of finding a new home. Seven percent said the current housing market is too limited.
The online survey of 1,531 homeowners conducted by Dynata for Discover Home Loans, the home equity and refinance lending unit of Discover Bank, were conducted from Jan. 20 to Jan. 26.
A separate survey from LightStream (part of Truist) released in early March found that 44% of homeowners are planning improvement projects in 2022, up from 39% last year.
Home improvement spending is expected to be strong into the third quarter of this year, before leveling off, according to the most recent Leading Indicator of Remodeling Activity report from the Joint Center for Housing Studies at Harvard University.
"Strong increases in home sales activity, household incomes, and home equity levels are supporting a faster expansion of the home remodeling market over the coming year," Carlos Martín, project director of the Remodeling Futures Program at the Center, said in a January press release. "As owners continue to navigate the ups and downs of the pandemic's trajectory, the focus on home improvements for changing wants and needs remains in sharp relief."
But some barriers exist for people immediately planning to start a project, with rising prices in building materials caused by supply chain issues.
Of those respondents to the Discover Home Loans survey planning to start a home improvement project within the next three months, 48% had experienced delays in getting materials, and 41% think it will take longer to complete as a result.
For the group that already has started a project, 57% said their costs have gone over the original budget, and nearly two in three report their project cost has increased since their initial contractor bid.
Rising interest rates are affecting the actions of those that need some form of financing to complete their renovations, with 42% of homeowners surveyed deciding to delay their project.
"As the U.S. continues to deal with rising material costs and supply chain issues, it's more important than ever for homeowners to plan ahead for their remodel," said Cook. "The best first step is to get your financing in order."
The share of homeowners that will finance all or part of the renovation project by taking out some form of debt increased compared with 2021, the LightStream survey found.
Among those surveyed, 60% said they would access savings to pay, but this was down from 66% a year ago. Respondents could pick more than one answer.
The next most popular choice for financing improvements was credit cards, of which 35% intended to use. This was up from 30% a year ago.
There was a significant increase in the percentage planning to take out a home equity line of credit to pay for the project, to 23% this year versus 9% in 2021.
Another 21% anticipated using a home improvement loan, compared with 14% that planned to do so in last year's survey.
Finally, 17% intended to liquidate or tap into their investment portfolio; only 8% said they would do so in 2021.
A knowledge gap exists among homeowners about paying for renovations, said Todd Nelson, senior vice president of strategic partnerships at LightStream, in a press release.
Credit cards where the balance is not paid off at the end of the statement period have high variable interest rates.
"Home equity lines of credit can be time-consuming to arrange and they rely on taking equity out of a property that so many homeowners have worked diligently to pay off," Nelson said. "Tapping into savings or selling high performing investments should be done cautiously, so as not to deplete liquidity that may be better used for other purposes."
Even home improvement loans have interest rates and terms that can vary widely between lenders, he said.
The 2022 LightStream Home Improvement Survey was conducted online by Ipsos among 1,301 U.S. homeowners between Jan. 4 and Jan. 13.
