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Financing in Focus for Home Improvement Projects

Aging housing stock, low inventory of homes for sale, and major demographic shifts are driving up demand for home improvements. In fact, 58% of homeowners on Houzz renovated their homes in 2017, at a median spend of $15,000. When it comes to funding those renovations, cash has consistently ranked as the leading form of payment, with 85% of renovating homeowners using personal savings, followed by credit card (33%) and secured home loans (15%).

That said, it is natural for consumers to look for advantageous financing methods in order to support renovation spend. We teamed up with Synchrony and Bank of America to explore the role of credit cards and secured financing, such as a home equity lines of credit (HELOC), cash-out refinancing or home equity loans, in home improvement projects.

Consumer Credit Card Spend for Home Improvement on the Rise

Based on our study with Synchrony, credit cards appear to be a competitive financing method for one-third of renovating homeowners, likely explaining the recent acceleration in credit usage. Consumers charged $141 billion in home improvement product and service purchases to their credit cards in 2017, a 69% increase from 2011 ($84 billion).* During 2016 and 2017, consumer credit card spend grew at near double the pace of the overall growth of the home improvement market, driving deeper market penetration.

Renovating homeowners using credit card financing report a median spend of $10,000, with between $1,500 and $4,800 charged to a card. Reliance on credit cards remains high even in larger renovations, with 28% of homeowners who spent $50,000 or more on their projects paying for at least part of those renovations with credit cards.

U.S Homeowners Choose Secured Financing Options for Large-Scale Home Renovations

While secured loan borrowers represent a smaller share of renovating homeowners than those who finance their projects with cash-only or with credit cards, they took on much larger home improvement projects, according to our study with Bank of America. The median spend of projects financed with secured financing were three times the median spend of those funded with cash-only or with credit cards ($32,000 versus $13,000 and $10,000, respectively).

In fact, homeowners who spent $50,000 or more on renovations were three times more likely to pay with secured financing (31%) than those spending between $5,000 and $14,999 (10%).