U.S. inflation reached an all-time high in June of the previous year, leading to increased prices for commodities like food and gas. Despite some moderation in the recent period, economists speculate that high inflation might persist until the end of 2024 or 2025 (source: Bankrate). However, despite rising costs, homeowners are still pursuing home improvement projects according to a survey conducted by Today’s Homeowners. This year’s projects, especially among millennials and Gen Z homeowners, are expected to differ from those in the past, with many opting for DIY solutions to mitigate expenses.
Around 50% of Americans are cutting back on home improvement projects this year due to tighter budgets. A survey by Today’s Homeowners found that out of every ten homeowners, nine have plans for home improvement projects in 2023. However, approximately half of them intend to spend less on these endeavors, with 28% stating “significant reductions” in their budgets.
These findings come after last year’s inflation peak in June 2022, where the U.S. consumer price index (CPI) experienced a 9.1% year-over-year growth, unseen since the 1980s.
Geographically, the reduction in home improvement spending varies across states. Connecticut has the highest percentage of homeowners cutting costs, with almost 72% aiming to tighten their budgets. In contrast, only 30% of respondents from Vermont said they would reduce their home improvement spending this year.
Among those planning home projects, the majority anticipate completing one to two projects (65.4%), with less than 9% planning to finish four or more.
To cope with the rising costs, homeowners are exploring various strategies. Approximately 51% of respondents are contemplating postponing their projects until 2024, primarily because of cost concerns.
Millennial and Gen Z homeowners are particularly inclined towards DIY solutions when faced with inflationary pressures, as indicated by the survey. About 76% of individuals between the ages of 18 to 24 and 73% of those between 25 to 35 stated that inflation had prompted them to undertake DIY home improvement projects instead of hiring contractors.
Another cost-saving measure entails using checking and savings accounts rather than borrowing money, given the continued rise in interest rates.
While 74% of homeowners are avoiding financing their home improvement projects due to increased borrowing costs, 37.4% expect to rely on credit cards for financing. However, it is important to note that credit cards carry an average interest rate of approximately 21%, which can accumulate if the balance is not paid in full.
When money is tight, homeowners should consider alternatives to finance unexpected repairs or planned projects. These options include home improvement loans, which come with fixed interest rates averaging just under 11%. However, borrowers with favorable credit can secure rates below 5%. Furthermore, many lenders offer quick funding options for emergency repairs.
Home equity loans and home equity lines of credit (HELOCs) are additional choices that allow homeowners to access up to 85% of their home’s value by using it as collateral. These loans typically offer lower interest rates compared to personal loans but carry the risk of foreclosure if payments are defaulted.
A cash-out refinance involves replacing the existing mortgage with a new loan, enabling homeowners to withdraw up to 80% of their home’s value. Similar to home equity loans and HELOCs, these loans have lower interest rates since they are secured by the property. However, defaulting on the loan may result in the bank seizing the property.
Ultimately, the most suitable financing option depends on individual circumstances and financial status. It is advisable to compare offers from at least three different lenders to ensure obtaining the best loan for specific needs.
©2023 Bankrate online. Visit Bankrate online at bankrate.com. Distributed by Tribune Content Agency, LLC.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
