Inflation Is Making Home Improvement Projects Less Attainable for American Homeowners
Discover Home Loans issued a survey to understand how inflation and higher interest rates have impacted American homeowners’ sentiment around investing in their homes versus moving to new homes.
Discover Home Loans issued a survey to understand how inflation and higher interest rates have impacted American homeowners’ sentiment around investing in their homes versus moving to new homes.
Inflation is significantly impacting homeowners’ desire to undertake home improvement projects, with 59% of survey respondents choosing to postpone their projects and 26% saying they will reduce the scope of their projects in the face of increased costs. That said, there remains strong demand for home renovation as 79% of homeowners surveyed still prefer to renovate their current house rather than move to a new home.
Rising interest rates are also having an impact on consumers' desire to move and purchase a new home. When asked how rising interest rates have specifically impacted their intention to purchase a new house, 42% of survey respondents said they are no longer looking to do so and an additional 21% are still looking but are less set on buying a new home.
“Our survey results show that homeowners are still looking to invest in their homes, despite higher home improvement costs. With large amounts of existing home equity untapped, a home equity loan is an attractive option for many homeowners looking to finance large-scale home improvements or consolidate their debts,” said Rob Cook, vice president of marketing, digital & analytics of Discover Home Loans. “Since home equity loans are second mortgages, they allow homeowners to keep their existing primary mortgage, which can be beneficial if they have a low rate on that mortgage. Another benefit is that home equity loans typically offer lower rates than credit cards and personal loans, and unlike HELOCs, provide the certainty of a fixed interest rate.”
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How Inflation is Affecting American Homeowners’ Home Improvement Projects |
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Their project is costing more than expected/budgeted |
44% |
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They had to cut part of their project |
26% |
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They are looking into a new or additional loan to cover their project |
14% |
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They took out a higher loan than initially planned to cover their home improvement project |
11% |
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Inflation has not affected their home improvement plans |
26% |
When asked what home improvements to undertake, homeowners are most interested in conducting routine maintenance, though the number of people wanting to do it decreased by 4 percentage points compared to last year’s survey. The number of Americans planning to remodel their existing bathroom jumped 5 percentage points while those wanting to update their appliances increased by 3 percentage points.
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Top 5 Improvements Americans are Wanting to Undertake: |
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Routine maintenance |
38% (4% decrease from last year’s survey) |
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Updating appliances |
34% (3% increase) |
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Remodeling an existing bathroom |
34% (5% increase) |
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Refinishing or replacing flooring |
31% (0% increase) |
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Remodeling an existing kitchen |
30% (2% increase) |
Cosmetic changes and eco-friendly home improvements are top-of-mind
Similar to last year’s findings, 80% of homeowners surveyed agree they are making improvements as a way to invest in their home, and 82% agree they plan to make cosmetic changes to their home to better fit their style and needs.
An interest in making “green” or eco-friendly renovations to homes was emphasized in these results, with 59% of homeowners fitting them into their renovation plans. Nearly half of respondents said they were doing so because they are environmentally conscious, while 68% aim to save money on their energy or water bill. Interestingly, Gen Z and Millennials were found to be most likely to make green updates to their homes at 67%, versus 56% of Gen Xers and 47% of Baby Boomers.
“As U.S. homeowners continue to deal with inflation and interest rate hikes, it’s important for homeowners to plan ahead and understand their budget before starting their renovation projects,” said Cook. “Homeowners should research current home loan options to get the best deal possible. Online tools, like Discover’s Loan Calculator can help homeowners determine how much they can borrow and what monthly payments could look like.”
About the Survey
The national survey of 1,500 homeowners was commissioned by Discover and conducted by Dynata (formerly Research Now/SSI), an independent survey research firm. The surveys were conducted online; the first was fielded from January 19th through January 29th, 2023. The maximum margin of sampling error was +/- 2% with a 95% level of confidence.
About Discover
Discover Financial Services (NYSE: DFS) is a digital banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company issues the Discover® card, America's cash rewards pioneer, and offers private student loans, personal loans, home loans, checking and savings accounts and certificates of deposit through its banking business. It operates the Discover Global Network® comprised of Discover Network, with millions of merchants and cash access locations; PULSE®, one of the nation's leading ATM/debit networks; and Diners Club International®, a global payments network with acceptance around the world. For more information, visit www.discover.com/company.
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