Americans are sitting on the most home equity in history, but their reluctance to use what seems like an obvious resource, especially for big-ticket items like home renovations, has befuddled housing analysts for months.
A new study suggests there’s more to it than just aversion to debt or the tedious credit-qualification process: Americans are increasingly opting to pay for home improvements with credit cards.
Some 36.4% of renovation spending in 2017 was done with cards, according to the study, conducted by home improvement web site Houzz and Synchrony Financial. That’s an increase of nearly one-quarter from the 29.5% share credit cards held in 2011, an amount that has increased each year since.
The vast majority – 85% – of survey respondents said they used cash/savings to pay for renovations. That was followed by 33% saying they used credit cards. Only 15% said they used a secured home loan – less than half the number who had charged projects.
Read: Cash-out mortgage refis are back — will homes become ATMs again?
As with so many other trends, it’s millennials who are driving it. Among homeowners aged 25 to 34, 41% paid with credit cards, while only 30% of those aged 55 and over did so.
Younger homeowners are also more likely to pay balances over time – 60-65% say that’s their plan – than are those 55 and up, of whom 49% expect to keep balances. Not surprisingly, among all homeowners who plan to keep balances, 74% are using a promotional card with low or no interest.
What may be more surprising is that those who use cards for these large transactions aren’t focused on rewards. Among the top reasons owners gave for using a credit card rather than other financing methods, “quicker access to funds” was the biggest, at 38%, while “better rewards” only accounted for 25%.
Also see: The housing market’s slowdown is going to kill the home renovation boom too