US inflation hit a record high in June last year, making everything from food to gas more expensive. Although things have slowed since then, economists predict that high inflation could persist until late 2024 or 2025.
Despite rising costs, consumers are still pushing ahead with home improvement projects, according to a survey by Today’s homeowners. That said, this year’s projects may look different than previous years, with many homeowners – especially millennials and Gen Z – opting for DIY solutions to keep costs in check.
About 50% of Americans will spend less on home improvement projects this year
Inflation may be easing, but high costs continue to dent already tight U.S. budgets. According to a survey by Today’s Homeowners, nine out of 10 homeowners have home improvement projects planned for 2023. However, about 50 percent say they will spend less on these projects, while 28 percent say they will spend “significantly less.”
These findings come more than a year after inflation hit a record high in June 2023. At the time, the US Consumer Price Index (CPI) recorded an annual growth rate of 9.1 percent – something not seen since the 1980s.
That said, the decline in spending has been more pronounced in certain states than others. Connecticut, for example, is the state where most homeowners are tightening their belts, with nearly 72 percent saying they want to reduce costs. In contrast, only 30 percent of Vermont respondents said they will reduce their home improvement spending this year.
Of those planning to take on projects this year, the majority expect to complete one (28.7 percent) to two (36.7 percent) projects, while less than 9 percent expect to complete four or more projects.
How homeowners deal with rising costs
In addition to reducing their budget, approximately 51 percent of respondents are considering delaying their home projects until 2024, with cost being the biggest factor driving this decision.
However, many – especially millennials and Gen Z homeowners – are turning to DIY solutions instead of hiring a professional to get the job done. According to the survey, 76 percent of adults between the ages of 18 and 24, as well as 73 percent of adults between the ages of 25 and 35, say inflation has pushed them to take on home improvement projects themselves rather than doing so with their own resources to do. a contractor.
Another way homeowners try to save money on costs is by using their checking and savings accounts for financing instead of borrowing money as interest rates continue to rise.
Paying for home improvement projects when money is tight
Although as many as 74 percent of homeowners are avoiding financing their home improvement projects due to the increase in borrowing costs, a good portion (37.4 percent) expect to use a credit card to finance the costs.
While credit cards can be a good option for financing smaller projects, they have an average interest rate of approx 21 percentwhich can increase if you are unable to pay your balance in full.
If money is tight, consider the following alternatives to finance unexpected home repairs and planned projects:
- Home improvement loan: These loans come with fixed interest rates. The average personal loan has an interest rate of just under 11 percent. However, depending on the lender and your credit, you could get a rate of less than 5 percent. Home improvement loans can also be a good option for emergency repairs, as many lenders offer next-day or even same-day financing.
- Mortgage interest deduction or home equity line of credit (HELOC): Both home equity loans and HELOCs are loans that allow you to tap into your home equity, up to 85 percent of your home’s value. These loans form a second mortgage on your home. Because the property serves as collateral, they typically have a lower interest rate than personal loans. However, if you do not repay your loan, you run the risk of having your property sold.
- Cash-out refinancing: With a cash-out refinance, you replace your existing mortgage with a new one with new terms and interest rates. This type of loan typically allows you to withdraw up to 80 percent of your home value. Like home equity loans and HELOCs, these loans have lower interest rates because they are secured by your home. On the other hand, defaulting on your loan could result in the bank foreclosing on your property.
Ultimately, the right financing option will depend on your specific situation and financial circumstances. Still, it’s always best to compare offers from at least three different lenders to ensure you get the best loan for your needs.
