Gen-Xers driving HELOC borrowing for large renovations

Homeowners prefer secure financing options for large renovation projects with HELOCs the favorite choice.

That’s one of the findings of a study by Bank of America and home renovation and design platform Houzz, which also found that Generation X are the drivers of large-renovation borrowing; accounting for 40% of renovating homeowners.

With the growth in home equity seen in recent years, homeowners who opted for secure financing options over cash were able to take on larger renovation projects on average with three times the budget ($32,000 vs $13,000).

When choosing secure financing, 47% chose a HELOC (47%) with total originations of $157 billion in 2017; more than 60% of consumer real estate-secured financing.

“Secured loan originations will likely continue to grow in the near term as homeowners increasingly find it advantageous to stay put and renovate rather than trade up to a nicer home in an environment of tight housing inventories and higher interest rates, among other factors,” said Nino Sitchinava, Houzz principal economist.

Updating homes while balancing other finances
David Doyle, senior vice president, Bank of America, says that homeowners are using secure financing to update housing stock while balancing other financial obligations.

“Homeowners, and Gen-Xers in particular, are comfortable using their home’s equity to make renovations that can have a significant impact on their lives, increasing their home’s value and improving their comfort,” he said.

The study shows the impact of Gen-Xers who are more likely to use a secured loan than Boomers and Millennials (17% vs 15% and 10% respectively). Their loans were also larger in 2017 at an average $38K compared to $30K for each of the other generations.