Discover Home Loans recently conducted a survey to gain insights into Americans’ intentions for their homes, whether they prefer renovating their current properties or purchasing new houses that better suit their needs and personal style. The survey findings shed light on the impact of high interest rates on homeowners and their financing options, as well as the influence of inflation on renovation plans.
According to the survey, 84% of those planning to buy a new home stated that interest rates have affected their decision. Among this group, 46% indicated that they are no longer actively looking, 35% are less committed in their search, and 30% have adjusted their budget. The majority of respondents (66%) expressed that they would seriously consider purchasing a home only if 30-year mortgage rates fall below 5%.
Rob Cook, the Vice President of Marketing at Discover Home Loans, noted that rate decreases are likely to be modest and gradual when the Federal Reserve gains confidence in controlling inflation. Cook advised consumers to adjust their expectations and budgets accordingly, acknowledging that the housing market may remain sluggish in the meantime.
The survey also revealed a shift in homeowners’ preferred financing options due to interest rates. Only 9% of homeowners plan to use a cash-out refinance for their home improvement projects, a significant decrease from 24% in 2023. Cook explained that homeowners are avoiding lending options that would impact their current mortgage rates. Instead, home equity loans are becoming more attractive as they allow homeowners to leverage the available equity in their homes without modifying their existing mortgage.
Inflation has also impacted homeowners’ finances, with 49% of respondents reducing discretionary spending and 33% delaying home renovation projects. Among those pursuing renovations, 47% stated that their projects are costing more than expected, and 30% have downsized their plans due to inflation.
Interestingly, more than half (55%) of American homeowners prefer renovating their current homes over moving to new ones (24%) or leaving their homes as they are (21%). The survey revealed that 57% of respondents either have an ongoing home improvement project or plan to start one within the next year. The top reasons for these projects include reflecting personal style (87%), viewing home improvements as an investment opportunity (84%), and upgrading features in need of repair (73%).
The survey also highlighted generational differences in attitudes towards home renovations and personal finances. Younger generations, such as Gen Z and Millennials, are more optimistic about their financial future, with 48% expecting improvement in the next year compared to 31% of Gen X and Baby Boomers. Gen Z and Millennials are more likely to undertake renovation projects to personalize their homes, while Gen X and Baby Boomers focus on renovations for a sense of accomplishment.
Spending and saving habits also vary across generations. Gen Z, Millennials, and Gen X are more likely to anticipate going over their budget for home improvement projects, while Baby Boomers are more likely to stick to their budget. Gen Z is also more inclined to save between 11-15% compared to other generations.
Discover Home Loans offers resources to help homeowners determine the financial feasibility of their renovation goals. Consumers can use the Discover Monthly Payment Calculator to receive an estimated interest rate and monthly payment breakdown for home renovation financing options.
About the survey, it was commissioned by Discover and conducted by Dynata, an independent survey research firm. The survey included 1,500 homeowners and was conducted from February 9th to March 13th, 2024.
Discover Financial Services, a digital banking and payment services company, is one of the largest card issuers in the United States. They offer various financial products, including private student loans, personal loans, home loans, checking and savings accounts, and certificates of deposit. Discover operates the Discover Global Network, which includes Discover Network, PULSE, and Diners Club International.
In conclusion, the survey conducted by Discover Home Loans provides valuable insights into Americans’ preferences for home renovations and buying. Despite the impact of high interest rates and inflation, many homeowners are opting to renovate their current homes to reflect their personal style and upgrade necessary features. Discover Financial Services continues to offer resources and financial solutions to support homeowners in achieving their renovation goals.