Photo: Robert Clark
Thanks to a highly competitive national housing market, some American homeowners would rather renovate than move, according to a recent survey conducted by the home-improvement website Houzz.
And a rising number of homeowners — Millennials, in particular — are renovating on credit. Perceived high costs of home improvements and the added flexibility to pay over time have many homeowners ditching cash for plastic.
“Aging housing stock, low inventory of homes for sale, and major demographic shifts are driving up demand for home improvements, so it is natural for consumers to look for advantageous financing methods in order to smooth out renovation spend over time,” said Nino Sitchinava, principal economist at Houzz.
One-third of all homeowners financed part of their home renovations in 2017 using credit cards, charging over $140 billion worth of products and services to their charge cards. This was a 69 percent increase from the $84 billion charged in 2011.
“During 2016 and 2017, consumer credit spend grew at near double the pace of the overall growth of the home improvement market, driving deeper market penetration,” writes Houzz in the report.
Homeowners that used credit cards for renovation spent a median of $10,000 on improvements, with between $1,500 and $4,800 financed on a card. Even in larger renovations, more homeowners are turning to plastic — some 28 percent of homeowners who spent $50,000 on improvements reportedly paid for at least of the expenses with credit.
Three in five credit card users plan to pay off their balances over time (62 percent), of which, a third plan to pay off credit cards within two and 11 months of purchase (33 percent).
Millennials were the most likely generation to use credit cards to finance renovations (41 percent), followed by Gen-Xers and Baby Boomers (34 and 30 percent, respectively).
Younger generations reportedly are more likely to revolve balances (65 and 60 percent of Millennials and Gen-Xers, respectively) than Baby Boomers (49 percent) are.
Meanwhile, over half of all renovating homeowners reportedly used cash and no other form of secured or unsecured financing.
However, one in five admits to giving credit cards “at least some consideration,” with 27 percent choosing not to use cards due to the perceived high costs of buying on credit. Still, among those that considered renovating on credit card, 37 percent of respondents would have used a different financing option, if it were available.
And for those homeowners considering charging the cost, promotional financing is the key to keeping interest rates affordable.
“Promotional financing can offer customers an easy and convenient way to make large purchases more affordable, and it can influence where shoppers buy,” said Courtney Gentleman, SVP and CMO of payment solutions at Synchrony Bank, in a statement.
The “Houzz and Home” survey was conducted in April 2018 and asked over 10,000 registered Houzz users about their home renovation plans.