A study by The Harvard Joint Center for Housing Studies (JCHS) shows that while millennials were once considered adverse to buying homes, homeownership amongst this generation is on the rise. A recent survey by LightStream, a national online lending division of SunTrust Bank, supports these findings: Millennials are behind a new home renovation and remodeling trend.
According to LightStream research, 69 percent of millennial homeowners plan to spend money on renovation projects in 2017, a 25 percent increase since 2014. Conversely, only 57 percent of baby boomers are planning home renovations this year.
So why are millennials planning more home renovations than baby boomers? For many, there is a focus on living in more urban areas, and often they are buying older homes without the upgrades and features they are seeking. Once in their new home, they are looking to spend money on renovation projects to make the residence fit their lifestyle. In fact, this year investing in home repairs/technology upgrades (new roof, windows, HVAC, solar, etc.) was the top renovation cited by millennials (37 percent). Besides home repairs, the most desired projects are pools (16 percent), up from 9 percent in 2016, and home additions (11 percent), up from 6 percent in 2016.
Baby boomers, on the other hand, are more focused on outdoor renovations this year (23 percent), which include deck/patio renovations, new landscaping and other exterior improvements. In addition, boomers are looking to remodel their kitchens and bathrooms (12 and 13 percent, respectively).
Multigenerational similarities in spending and paying
While millennials and baby boomers project priorities may be different, the survey did find some similarities. For example, when it came to budgeting, millennials (35 percent) and baby boomers (50 percent) say they plan to spend $5,000 or more on renovations this year.
And when asked how they plan to pay for these renovations, both millennials and baby boomers hope to at least partially use their savings—the most cited response for both groups (58 percent and 61 percent, respectively). For those who may not have savings to pull from, both groups, surprisingly, also mentioned credit cards as an alternative payment option.
Financing options for renovation projects
Tapping into savings is certainly a good option. You don’t have to pay anyone back nor accrue interest charges and fees. Still, many homeowners may not want to spend their entire nest egg, preferring the security of having cash available for other expenses and emergencies. Today’s low interest rates and variety of financing tools make other options worth investigating.
Surprisingly, 44 percent of millennials and 23 percent of baby boomers said they would use credit cards to pay for renovations. If you have a solid payment history and a good credit score, some credit card companies may offer low introductory rates or rewards such as rebates, flight mileage or other incentives. This may be a solid strategy for expenses under $5,000, where renovation expenses can be paid off quickly without accumulating significant interest charges. However, for big-ticket home improvement purchases, carrying a large credit card balance may be expensive, significantly growing the overall cost of a project.
For those clients whose home may have appreciated since its initial purchase, a home equity line of credit can be an attractive option, borrowing against a home’s increased value. Consult a tax advisor to find if your client’s HELOC would be tax deductible. With this option, it’s important to allow time for processing, including paperwork and an appraisal.
For people with good credit, an unsecured home improvement loan may be an answer. For instance, LightStream offers low, fixed-rate, financing up to $100,000 with no fees. For rates, disclosures and other important information, visit LightStream.com.
If you’re among the 59 percent of homeowners planning to spend money on renovations this year, make sure to do your financial homework. A little research can save you time, energy and money to turn your dream project into a real improvement.
Todd Nelson, business development officer at LightStream, the online lending division of SunTrust Bank