Are you ready to tackle a home improvement project this year? If so, you have plenty of company. According to the latest LightStream Home Improvement Survey, 58% of Americans are ready to pour money into home improvement projects in 2018.
The percentage of homeowners planning projects is close to 2017's 59% value, but homeowners are willing to spend more per project in 2018. Approximately 45% of respondents plan to spend $5,000 or more on their projects, the highest percentage in the survey's five-year lifetime. Larger home projects are booming, as the percentage of homeowners planning to spend over $35,000 doubled from 2017.
"From millennials to seniors, every age group is planning projects to stay in their homes longer," said LightStream SVP of Strategic Partnerships Todd Nelson. "In fact, only seven percent of people are remodeling to put their homes up for sale. That's the smallest number we've seen since we started the survey."
The survey results suggest that economic optimism appears to be taking hold, and the recent Tax Cuts and Jobs Act has factored into that optimism for some homeowners. One-quarter of respondents that had created a budget for their renovations altered that budget due to tax reform, with 18% increasing their budget.
What's the most popular area of the home to be renovated? Outdoor projects take the overall prize, with 43% planning deck/patio/landscaping renovations and another 5% renovating pools. Bathroom and kitchen remodels are close behind at 31% and 26% respectively.
While home improvement spending may be on the increase, labor costs may not rise proportionately. According to the survey results, the DIY impulse is strong. Just under two-thirds of respondents plan to do at least some of their own project work, and 35% plan to handle the entire project on their own. Millennials (ages 18-34) lead the DIY charge with 70% expecting to tackle some portion of the project work themselves.
A significant majority of renovators (62%) plan to pay for at least part of their home renovation with savings. Credit cards will be used by 30% of homeowners to finance renovation projects, while 13% expect to use a home equity line of credit (HELOC) and 9% plan to take out a home improvement loan.
Because of the relatively high interest rates on credit cards, it's best to avoid them for funding all but small projects that you can pay off at the end of each month. A HELOC or home improvement loan may be a better choice if you have to borrow.
Home improvement loans are well suited for large projects with detailed milestones that the lender can review and approve. A HELOC is a more flexible line of credit that you can use as needed without having to supply the lender any details on the specific project.
Which is better for you? A HELOC is a popular choice if you have significant equity in your home, but there are other factors to consider.
Greg McBride, Chief Financial Analyst from Bankrate.com, reminds us that with a HELOC, "because you're securing the loan with the equity that you have in your home, you're getting a lower interest rate." The trade-off for that security is that your home is vulnerable should you default on the HELOC. Defaulting on an unsecured home improvement loan will harm your credit, but it won't cost you your home.
Ask your lender for details on your specific lending options in order to make the best decision.
If you are planning a home project in 2018, we wish you good luck. Remember that all projects require planning and forethought to avoid mission creep and cost overruns. Stay focused, stay within your budget, and know when to call in the professionals. If you don't know which breaker to turn off, where the sewer line is buried, or where the gas shutoff is, prepare to take out your wallet.
MoneyTips is happy to help you get free refinance quotes from top lenders.