MarketWatch reporter Amy Hoak writes on the growing trend of homeowners remodeling their homes instead of moving, despite their families growing. Hoak says that more homeowners are pouring their money into current homes, which has resulted in a spike in remodeling projects nationwide. 2016 is expected to see one of the highest levels in home-improvement spending according to Harvard University’s Joint Center for Housing Studies. Spending is expected to reach $325 by early 2017.
Furthermore, mortgage rates are also intended to rise over the next few years, meaning many current homeowners will have less incentive to move, and instead improve, as they’ll want to keep their 30-year fixed-rate mortgages.
A fundamental reason homeowners see remodeling as an attractive alternative to moving: More are now eligible to tap their home’s equity to pay for improvements.
When home prices plummeted in the last housing crash, homeowners lost trillions of dollars in home equity. Some owed more than their homes were worth. Home-equity lending naturally waned.
Years later, it’s a different story. By the end of last year, 91.5% of residential properties with mortgages had equity, according to property information company CoreLogic. Home equity has increased by $6 trillion since mid-2011, and more than 60 million homes have at least 25% equity.