Spending on home improvements is rising, and more homeowners are using credit cards and loans to pay for such projects.
The U.S. home improvement industry has been clawing its way back up since the Great Recession.
This year could “easily” see record-level spending, beating out the $324 billion spending record reached in 2007, according to a recent report from the Joint Center for Housing Studies at Harvard University.
An annual homeowner survey conducted by Harris Poll for LightStream, SunTrust Bank’s online lending division, found that 57 percent of homeowners plan to spend money on home improvement this year.
As Todd Nelson, LightStream business development officer, told MarketWatch today:
Consumers are increasingly putting money back into their homes. … This is good for the economy and the home-improvement industry overall.
But what’s good news for banks isn’t necessarily good news for consumers.
In the LightStream survey, the percentage of homeowners who report planning improvement projects for this year is up only 1 percent from last year — but the percentage who plan to pay for their home improvements with loans and lines of credit is up disproportionately:
- 59 percent of respondents plan to pay for home-improvement projects with savings. (That is down from 72 percent last year.)
- 30 percent plan to pay with a credit card (up from 21 percent last year).
- 9 percent plan to pay with a home equity line of credit, or HELOC. (Last year’s numbers were not available.)
- 7 percent plan to pay with a loan (up from 6 percent last year).
That means more homeowners will also be paying interest on top of the outright costs of their projects.
Do you plan to finance home repairs with credit because you lack an emergency fund? Are you going to finance any type of home improvement with credit because you can’t afford to pay for it outright? If you answered yes to either question, realize that those are among Five Signs That You Are a Credit Abuser.