Today’s homeowners have a problem that many aspiring first-time homebuyers would be lucky to have: Their mortgage rates are too low to give up, and their monthly payments are too cheap to trade in. Some homeowners don’t want to move and sacrifice their lower housing payments, and others can’t afford to buy another home given current rates and home prices.
With no choice but to stay put, many Americans are making improvements to the homes they feel “stuck” living in, according to a new survey from U.S. News.
Between May 23 and 30, U.S. News ran a nationwide survey of 1,202 homeowners who have a home improvement project in the works, conducted through PureSpectrum. We asked homeowners a series of questions about their current renovations, including how they plan on paying for them and why they’re deciding to make improvements to their home. Here’s what we found:
— Many Americans are finding ways to improve their current space because they can’t afford to move. Over half of homeowners (57%) feel they’ll have to live in their current home for longer than previously expected due to rising mortgage rates and home prices, and 47% are making improvements to their home because they feel “stuck” where they are. Most (52%) say they bought a starter home that they think might now be their forever home.
— The most common reason homeowners took on their projects was to make their space better fit their needs or desires, with 49% saying so. A quarter (25%) need to make necessary updates and repairs, while a fifth (20%) want to add value to their home. A small amount (7%) are making home improvements to get their property ready to list for sale.
— Respondents favor small home improvement projects over large-scale remodels. About two in five (42%) are planning light aesthetic projects, such as painting or landscaping. Thirty percent are doing full renovations, such as kitchen or bathroom remodeling, while 28% are doing moderate functional projects, such as replacing windows or flooring.
— Homeowners aren’t afraid to put in a little bit of sweat equity. While 21% are hiring a contractor to do all the work, 44% are completing their projects all by themselves. Among DIYers, the most common reason they aren’t hiring a contractor is that they have the skills required to tackle this type of project (36%), followed by wanting to save money (28%).
— Most homeowners will have to borrow money to help pay for their renovations. About two-thirds (64%) will use savings to help pay for their home improvement projects, but just 43% will be able to pay using only savings. A third (34%) will tap credit cards to help fund their projects, and 15% will borrow a personal loan. What’s more, 18% of homeowners say they have no emergency fund to cover urgent repairs.
[Read: Best Home Improvement Loans. ]
Homeowners Who Can’t Move Improve Instead
Locked in by their low mortgage rates and housing payments, homeowners who can’t afford to buy their next dream home might just build it where they already are.
A young woman in Virginia Beach, Virginia, is adding a “she shed” to her home. She expects the work will cost between $10,000 and $25,000, and she’ll use a home improvement loan to pay for it.
A Gen Z homeowner in Asheville, North Carolina, is building an outdoor kitchen. He’ll be doing part of the work himself, but he’ll need to hire a contractor to finish the job, leaning on credit cards to cover the cost.
A senior in Kingston, New York, is replacing her kitchen flooring, repairing her roof, building an outdoor patio and adding a no-mow clover lawn — projects that will make her home better suit her lifestyle, given that she says she’ll live there longer than originally expected.
In fact, that’s a common sentiment: 57% of respondents say they’ll have to live in their homes for longer than they previously thought due to rising housing costs. And nearly half (47%) agree with the following statement: “I’m making improvements to my home because I’m stuck here and I can’t afford to move at current mortgage rates/home prices.”
All told, respondents are most commonly making home improvements simply because they want to make their house a better place to live. Homeowners mention a host of recreational additions, like pools, gardens and patios — even a jungle gym, basketball court and volleyball net.
Of course, for the 25% of homeowners who say they need to make necessary repairs and updates, it’s not all fun and games. Some homeowners mention moldy bathrooms, water leaks and termite damage.
And many homeowners tackle home improvement projects thinking they’ll pay off through the return on investment. About a fifth say they’re improving their home in order to add value to it, with many of those respondents tackling large-scale projects like kitchen and bathroom remodeling.
[Related:Personal Loan vs. Home Equity Loan: Which Is Better?]
DIYers Spend Less, but It’s Not All About the Money
Owning a home, you learn quickly how to handle a wide array of projects like painting cabinets or planting shrubs. Homeowners in our survey are willing to DIY all sorts of small jobs like those mentioned above — as well as some larger-scale remodeling projects. Here’s how homeowners in our survey plan on divvying up the work:
— 44% are doing all the work by themselves.
— 35% are doing part of the work by themselves, while hiring a contractor to handle some aspects of the project.
— 21% are hiring a contractor to do all the work.
Naturally, those who opt for DIY usually pay less money over the course of their renovations. On one hand, DIYers are more likely to tackle smaller projects that cost less, but they’ll also cut down on labor costs. Those who have the know-how to DIY their home improvements are far more likely to keep their budget under $5,000 than those who need to hire a contractor.
But among those who are willing to put in a little sweat equity, money wasn’t even the No. 1 reason to go the DIY route. Over a third (36%) of those who didn’t hire a contractor say they have the skills to tackle this type of project, and about a quarter (23%) say they just enjoy learning how to do DIY projects.
Meanwhile, 28% say they went the DIY route to save money, and 14% wouldn’t be able to afford their home improvement project otherwise.
How Homeowners Plan on Paying for Renovations
We asked homeowners how they’re paying for their home improvement projects. Respondents could select more than one answer, for example, “savings” and “credit cards.” Here’s what they say:
64% are paying out of savings. This is the ideal way to pay for home improvement projects, since you don’t have to borrow money with interest. However, while 64% of homeowners are using savings to help pay for their renovations, just 43% are covering the full cost of their projects using only savings, meaning 57% have had to borrow money in one way or anther — most commonly credit cards and personal loans.
34% are paying via credit card. Financing renovations with a credit card can be helpful or disastrous — it all depends on the context and how that credit is used. A homeowner who pays for renovations using a credit card without a repayment plan could end up tacking on transaction fees and interest, getting stuck in a cycle of debt. On the other hand, one who pays for construction materials using a home improvement store credit card with a deferred-interest financing agreement may be able to avoid paying interest altogether, as long as the payments are made on time.
15% are borrowing a personal loan. Unsecured personal loans are often used to pay for home improvements, allowing homeowners to split the cost of renovations into smaller monthly payments over time without needing equity or using their home as collateral. Home improvement loans can offer fast access to cash at a lower interest rate than your typical credit card, but the terms vary widely based on the applicant’s creditworthiness. In other words, home improvement loans can be really great for some borrowers, but expensive for others.
11% are tapping their home’s equity with a loan or line of credit. Because they’re secured by your home, home equity loans and HELOCs can offer lower interest rates than unsecured products like credit cards and personal loans. Home equity financing products may also have more lenient eligibility criteria than other borrowing methods. However, tapping your home’s equity is time-consuming — it can take weeks or more to get the money you need for renovations. Plus, you risk losing the roof over your head if you fail to repay the loan.
10% are using contractor financing plans. Some home improvement contractors may offer payment agreements (usually just a type of loan) through a third-party financing company, such as a bank, credit union or another financial institution. As a benefit, some of these agreements could come with deferred-interest promotions, allowing you to save money while you repay the debt. However, borrow wisely: These agreements vary widely from one provider to the next, so read the fine print before agreeing to any contractor financing plans.
6% are cashing out their equity by refinancing. A cash-out mortgage refinance is when you take out a new mortgage that’s larger than what you owe on your home and keep the difference in cash. However, mortgage rates are painfully high right now, and the vast majority of homeowners have lower rates than what’s currently available. Cash-out refinancing can be a smart way to tap your home’s equity, but not at the risk of losing much better financing terms.
More from U.S. News
Mortgage Forecast: Will Rates Go Down in 2024?
How to Pay for Your Home Renovations
Buy Now, Refi Later: 84% of Recent Homebuyers Plan on Refinancing
Survey: Unwilling to Sell, Many Homeowners Remodel Instead originally appeared on usnews.com
