U.S. Homeowners Choose Secured Financing Options for Large-Scale Home Renovations, Houzz-Bank of America Study Finds
HELOCs Are Most Commonly Used Form of Secured Financing; Gen-Xers Drive Borrowing
U.S. homeowners who leveraged secured financing to pay for renovations in 2017 were able to take on larger home improvement projects, with nearly three times the median spend of those who paid for renovations with cash-only ($32,000 versus $13,000), according to a study released today by Houzz Inc., in collaboration with Bank of America.
The study explored the role of secured financing in U.S. home improvement and found that one in seven homeowners who used secured financing, such as a home equity line of credit (HELOC), home equity loan or cash-out refinancing, took on major remodeling projects. In fact, homeowners who spent $50,000 or more on renovations were three times more likely to pay with secured financing than those spending between $5,000 and $14,999 (31 versus 10 percent, respectively).
Of the available secured financing options, HELOCs are the most commonly used (47 percent). HELOC originations totaled $157 billion in 2017, accounting for more than 60 percent of consumer real estate-secured financing. According to the study, top motivations for choosing a HELOC include ease of use (39 percent), low cost (38 percent), quick access to funds (30 percent) and tax deductions (29 percent).
“Recent record gains in home equity give homeowners greater confidence to invest in their home, spurring growth in the more than $300 billion home improvement market. Our study confirms that a meaningful share of homeowners are tapping into it to fund large-scale renovations, such as kitchen and bathroom remodels,” said Nino Sitchinava, Houzz principal economist. “Secured loan originations will likely continue to grow in the near term as homeowners increasingly find it advantageous to stay put and renovate rather than trade up to a nicer home in an environment of tight housing inventories and higher interest rates, among other factors.”
Gen-Xers, who represent 40 percent of renovating homeowners, are more likely to finance renovations with a secured loan than any other generation (17 percent compared to 15 percent of baby boomers and 10 percent of millennials).* Of borrowers, they also spend the most on renovations (median of $38,000 in 2017), compared to millennials and baby boomers who each spent a median $30,000. Across generations, borrowers financed a significant portion of renovations (up to 74 percent) with secured loans.
“Homeowners, and Gen-Xers in particular, are comfortable using their home’s equity to make renovations that can have a significant impact on their lives, increasing their home’s value and improving their comfort,” said David Doyle, senior vice president, Bank of America. “Using responsible financing options, such as HELOCs from Bank of America, homeowners are updating aging housing stock and improving their home lifestyle while still balancing other financial obligations.”
Most borrowers plan to pay off their secured loans within five years, though one-third prefer six years or longer payment plans (32 percent), in part informed by loan pay-off terms. The payment period varies widely depending on the type of loan, with cash-out refinance commanding the longest payoff schedules. Fifty-seven percent of renovating homeowners leveraged promotional interest rates for secured financing in 2017, most commonly for HELOCs (61 percent), followed by home equity loans (58 percent) and cash-out refinancing (47 percent).
The Houzz & Home Survey
The annual Houzz & Home survey is the largest survey of residential remodeling, building and decorating activity published. The survey covers a wide range of renovation projects in 2017, including interior remodels, additions to home systems, exterior upgrades, and outdoor projects. Data gathered includes historical and planned spends, professional involvement, motivations and challenges behind building, renovation and decorating projects, as well as planned activities for 2018. The 2018 study includes nearly 150,000 respondents in the U.S. alone, providing insights into the home improvement activity of the more than 40 million monthly unique users of the Houzz site and mobile apps.
The Houzz & Home Survey was sent to registered users of Houzz and fielded in March-April 2018.
Houzz has over 17 million photos of professionally designed interiors and exteriors, including completed kitchen and bathroom projects, and more than 2.1 million active home remodeling and design professionals including architects, interior designers, general contractors and design-build firms.
*Generational segments are defined as millennials (ages 25 to 34), Gen-Xers (ages 35 to 54) and baby boomers (ages 55+).
Houzz is the leading platform for home renovation and design, providing people with everything they need to improve their homes from start to finish – online or from a mobile device. From decorating a small room to building a custom home and everything in between, Houzz connects millions of homeowners, home design enthusiasts and home improvement professionals across the country and around the world. With the largest residential design database in the world and a vibrant community empowered by technology, Houzz is the easiest way for people to find inspiration, get advice, find products and hire the professionals they need to help turn their ideas into reality. Headquartered in Palo Alto, Calif., Houzz also has international offices in London, Berlin, Sydney, Moscow and Tokyo. Houzz is a registered trademark of Houzz Inc. worldwide. For more information, visit houzz.com.
About Bank of America
Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 67 million consumer and small business clients with approximately 4,400 retail financial centers, approximately 16,100 ATMs, and award-winning digital banking with more than 36 million active users, including nearly 26 million mobile users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations across the United States, its territories and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
Reporters May Contact:
Terry Francisco, Bank of America, 1.213.345.9024
Kris Yamamoto, Bank of America, 1.805.526.1910