Inflation Is Making Home Improvement Projects Less Attainable for American Homeowners

Rhea-AI Summary

Discover Home Loans conducted a survey revealing that rising inflation and interest rates are negatively impacting homeowners' plans for home improvement projects. Approximately 59% of respondents plan to delay their projects, while 26% will reduce the project scope due to increased costs. Despite these challenges, 79% prefer to renovate rather than move. Additionally, 42% report interest rates have deterred them from purchasing new homes. Interestingly, 80% of homeowners view renovations as investments in their property, with 59% planning eco-friendly improvements. The survey, conducted by Dynata, involved 1,500 homeowners in January 2023 and showcases the financial pressures affecting the housing market.

Positive

• 79% of homeowners prefer to renovate their current homes rather than move.
• 80% view renovations as an investment in their property.
• 59% of homeowners are incorporating eco-friendly updates into renovation plans.

Negative

• 59% of respondents are postponing home improvement projects due to inflation.
• 26% are reducing the scope of their projects because of increased costs.
• 42% of homeowners report that rising interest rates have deterred them from purchasing new homes.

Nearly three-quarters of homeowners are finding projects to be more expensive than originally budgeted, causing some to reconsider their renovation plans

RIVERWOODS, Ill.--(BUSINESS WIRE)-- Discover Home Loans issued a survey to understand how inflation and higher interest rates have impacted American homeowners’ sentiment around investing in their homes versus moving to new homes.

Inflation is significantly impacting homeowners’ desire to undertake home improvement projects, with 59% of survey respondents choosing to postpone their projects and 26% saying they will reduce the scope of their projects in the face of increased costs. That said, there remains strong demand for home renovation as 79% of homeowners surveyed still prefer to renovate their current house rather than move to a new home.

Rising interest rates are also having an impact on consumers' desire to move and purchase a new home. When asked how rising interest rates have specifically impacted their intention to purchase a new house, 42% of survey respondents said they are no longer looking to do so and an additional 21% are still looking but are less set on buying a new home.

“Our survey results show that homeowners are still looking to invest in their homes, despite higher home improvement costs. With large amounts of existing home equity untapped, a home equity loan is an attractive option for many homeowners looking to finance large-scale home improvements or consolidate their debts,” said Rob Cook, vice president of marketing, digital & analytics of Discover Home Loans. “Since home equity loans are second mortgages, they allow homeowners to keep their existing primary mortgage, which can be beneficial if they have a low rate on that mortgage. Another benefit is that home equity loans typically offer lower rates than credit cards and personal loans, and unlike HELOCs, provide the certainty of a fixed interest rate.”

How Inflation is Affecting American Homeowners’ Home Improvement Projects
Their project is costing more than expected/budgeted	44%
They had to cut part of their project	26%
They are looking into a new or additional loan to cover their project	14%
They took out a higher loan than initially planned to cover their home improvement project	11%
Inflation has not affected their home improvement plans	26%

When asked what home improvements to undertake, homeowners are most interested in conducting routine maintenance, though the number of people wanting to do it decreased by 4 percentage points compared to last year’s survey. The number of Americans planning to remodel their existing bathroom jumped 5 percentage points while those wanting to update their appliances increased by 3 percentage points.

Top 5 Improvements Americans are Wanting to Undertake:
Routine maintenance	38% (4% decrease from last year’s survey)
Updating appliances	34% (3% increase)
Remodeling an existing bathroom	34% (5% increase)
Refinishing or replacing flooring	31% (0% increase)
Remodeling an existing kitchen	30% (2% increase)

Cosmetic changes and eco-friendly home improvements are top-of-mind

Similar to last year’s findings, 80% of homeowners surveyed agree they are making improvements as a way to invest in their home, and 82% agree they plan to make cosmetic changes to their home to better fit their style and needs.

An interest in making “green” or eco-friendly renovations to homes was emphasized in these results, with 59% of homeowners fitting them into their renovation plans. Nearly half of respondents said they were doing so because they are environmentally conscious, while 68% aim to save money on their energy or water bill. Interestingly, Gen Z and Millennials were found to be most likely to make green updates to their homes at 67%, versus 56% of Gen Xers and 47% of Baby Boomers.

“As U.S. homeowners continue to deal with inflation and interest rate hikes, it’s important for homeowners to plan ahead and understand their budget before starting their renovation projects,” said Cook. “Homeowners should research current home loan options to get the best deal possible. Online tools, like Discover’s Loan Calculator can help homeowners determine how much they can borrow and what monthly payments could look like.”

About the Survey

The national survey of 1,500 homeowners was commissioned by Discover and conducted by Dynata (formerly Research Now/SSI), an independent survey research firm. The surveys were conducted online; the first was fielded from January 19^th through January 29^th, 2023. The maximum margin of sampling error was +/- 2% with a 95% level of confidence. ​

About Discover

Discover Financial Services (NYSE: DFS) is a digital banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company issues the Discover® card, America's cash rewards pioneer, and offers private student loans, personal loans, home loans, checking and savings accounts and certificates of deposit through its banking business. It operates the Discover Global Network® comprised of Discover Network, with millions of merchants and cash access locations; PULSE®, one of the nation's leading ATM/debit networks; and Diners Club International®, a global payments network with acceptance around the world. For more information, visit www.discover.com/company.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230417005162/en/

Media Contact:

Sheetal Shah

Discover

sheetalshah@discover.com

224-405-0297

@Discover_News

Source: Discover Financial Services

FAQ

How are inflation and interest rates affecting Discover Financial Services' stock DFS?

High inflation and interest rates are causing a decline in home improvement projects, which could impact Discover's lending business.

What percentage of homeowners prefer to renovate rather than move?

79% of homeowners surveyed prefer to renovate their current homes instead of moving.

What were the main findings of the Discover Home Loans survey?

The survey revealed that rising costs are delaying projects for 59% of homeowners and 42% are reconsidering new home purchases due to interest rates.

What eco-friendly improvements are homeowners planning according to the survey?

59% of homeowners are planning eco-friendly renovations, with a focus on saving money on energy and water bills.