With the housing market getting hotter, many homeowners are finding fewer available properties for much higher costs. This trend, which has been steadily rising since at least 2015, has led to many homeowners to stay put and opt to renovate their existing homes rather than searching a competitive market for a new one.
Houzz, an online platform for home renovation and design, released the findings from their Houzz & Home survey, which pertained to how much homeowners were spending on home renovations.
According to the survey, 25-to-34-year-olds spent an average of $26,200 on upgrades, while first time homebuyers spent approximately $33,800. Additionally, baby boomers outspent millennials in their home improvement endeavors, which resulted in a national average of $60,400 spent on renovations.
However, homeowners do not seem to be taking the traditional route when it comes to financing these renovations. With mortgage rates remaining so low for so long, many opt to take out a second loan in order to get the cash they need, rather than refinancing their current mortgage to achieve the same feat.
Furthermore, since credit cards gained popularity, many homeowners choose to avoid taking out loans entirely by putting their expenses on a low-interest card instead. Because of this trend, the use of credit cards to fund home renovations has jumped 2 percentage points to 23 percent over the past several years alone.
Seeing as the housing market is not headed for a cool down any time soon, Houzz has predicted that many renovation and design firms are headed for a 10 to 12 percent increase in gross revenue, in contrast to the 8 to 10 percent growth they saw just last year.
In spite of these positive trends, the booming home renovation industry could pose a threat to homeowners’ budgets, as increased demand will likely raise firms’ prices. Therefore, remaining on budget and on time with renovations is a vital — and often challenging — step in the home improvement process.
In order to remain on track, it is imperative that homeowners establish their budget and stick to it, even if it means they downgrade or even scrap entire elements of their design. Although this may sound difficult, such a sacrifice can be easier to make if homeowners keep an open mind and remember that they will have other opportunities to make further improvements to their home down the road. After all, it is more important to maintain financial security than it is to spring for expensive kitchen tile.