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best credit cards for home improvement
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More Americans paying for home-improvement projects with credit cards and loans
Published: Mar 21, 2015 8:18 a.m. ET
For Tom Newell, a remodeling contractor in Frederick, Md., 2015 is shaping up to be a great year.
Normally at this time, business is slow enough that he can put jobs on his calendar as soon as five to seven days after the initial contact with a customer. Now he’s telling both repeat and referral customers they might have to wait weeks before his company, Newell Property Services, can get to them. “We’re scheduling a month out and I hired more people because of it,” he said.
Newell isn’t alone. In January, the Joint Center for Housing Studies (JCHS) at Harvard University said spending nationwide on home improvements in 2015 could easily exceed the record of $324 billion set during the peak of last decade’s housing boom.
And not only are people eager to spruce up their homes, they’re borrowing money to do it.
“Consumers are increasingly putting money back into their homes,” said Todd Nelson, business development officer for Atlanta-based SunTrust Bank’s STI, -0.70% online lending unit, LightStream. “This is good for the economy and the home-improvement industry overall,” he said.
A SunTrust survey of close to 1,300 homeowners last month showed that while the percentage of Americans who plan to invest $5,000 to $10,000 or more this year on home improvements hasn’t changed much from the 57% surveyed in 2014, the number of Americans content to put it on a credit card has jumped from 21% a year ago to 30% this year, Nelson said. Americans who will use personal loans, both secured and unsecured, rose slightly to 7% of those surveyed for 2015, up from 6% a year ago.
The improvements aren’t just for the homes they’re living in. At a time when six out of 10 millennials rent, many landlords see home-improvement projects as a good way to charge higher rates.
“The millennials’ increasing presence in the rental market has already helped to lift improvement spending in that segment,” said Chris Herbert, managing director of Harvard’s Joint Center for Housing Studies in January.
This demand is also reflected at the retail level. Home Depot HD, -0.09% last month posted better-than-expected quarterly results and said it would hire 80,000 workers for the spring and summer season, matching last year’s seasonal hire level.
Consumers, said SunTrust’s Nelson, appear more comfortable with some debt, as the number of Americans surveyed who will dip into savings to fund projects in 2015 fell to 59%, down from 72% a year ago. Just 4% said they would fund the home improvement projects from investment gains, the survey showed. “Taking money out of a hot stock market doesn’t necessarily make sense, especially when well-qualified consumers can borrow at extremely attractive rates,” he said.
While 27% of the homeowners surveyed are remodeling but not planning to sell their homes, about 8% are doing it to improve the value and marketability of their home when they sell it, Nelson said.
Newell’s fellow contractors are seeing customer demand for bigger home-improvement projects, as well.
Kathi Fleck, who co-owns Lonestar Property Solutions remodeling company with her husband Don in Dallas, said many customers are looking to spend between $15,000 and $25,000 on “facelift” projects, though more are beginning to ask for bigger improvements including kitchen remodel projects, costing up to $60,000, and bathroom remodels, for up to $40,000.
“All jobs have increased over the past couple years, and specifically 2014 and this year,” she said. And most of her clients are using financing rather than savings. “The homeowners we work with are generally financing the more high-end, costly projects through companies who specialize in home-improvement loans,” she said.
“The average homeowner we work with doesn’t have significant personal savings to throw at a big remodeling project,” she said.