Just 5% of home improvement projects during the refinance boom were financed by mortgage products, according to a Nerdwallet analysis.
Americans overwhelmingly used cash savings to spend $827 billion on renovations between 2021 and 2023, according to federal data. That was $200 billion more than they spent between 2019 and 2021, as the cost of materials and labor, and the pace of new projects, increased.
Just 3% of homeowners in the recent period used a home equity loan to pay for an average of $16,000 in project costs, data from the U.S. Census Bureau’s American Housing Survey showed. And despite massive refi volume during that stretch, just 2% of consumers used an average of $11,000 of refi dollars for renovations.
A leading 76% of consumers instead used an average of $5,105 in cash savings to pay for projects. The Nerdwallet analysis suggests, however, that consumers could begin turning to their massive, untapped home equity to cover more expensive projects.
Homeowners were more likely to hire professionals last year, with the share of do-it-yourself projects falling from 39% to 36%. Professional jobs cost $8,100, three times more than a DIY project.
Economic uncertainty slightly weakened the renovation market as rates rose in the past year, according to a LendingTree analysis. With today’s lock-in effect however, the appetite for home renovations is expected to boom.
Harvard University’s Joint Center for Housing Studies anticipates home improvement and maintenance costs to grow to $477 billion on an annual basis in the next 12 months. That should coincide with the eventual return of refinance volume, which Fannie Mae projects growing to $600 billion in originations next year.
While the industry’s largest players also report growing home equity activity, ICE Mortgage Technology finds the nation’s over $17 trillion in total equity relatively underutilized.
The demand for renovation funds may come more often from older homeowners, who the Nerdwallet analysis finds are less likely to undertake DIY projects. Homeowners younger than 25 years old went the cheaper DIY route 62% of the time, across 1 million projects.
Residents between ages 55 and 64 accounted for over 32 million renovation projects, and opted for cheaper DIY undertakings just 35% of the time. Familiar projects like kitchen renovations average close to $43,000, Nerdwallet said, while any type of upgrade averages around $6,200 each.
