Home Equity Financing Expected to Grow in 2022 According To Study From LoanMoz
A new study from LoanMoz predicts that home equity financing will be a $1 trillion market in five years. The company is online loan information and comparison source based in Portland, Oregon in the United States. According to its website, it is "dedicated to exploring and organizing the massive amounts of data in this industry."
Huge Increase In Home Renovations and Remodeling Projects Fueled By Record Home Appreciation Will Drive Market Through 2022
The company's latest research reports home equity financing is forecasted to grow at a compound annual growth rate of 9.87 percent through 2022 reaching $1 trillion by year-end. The study cited an "explosion in remodeling projects" as the reason for this increase in business, which is being spurred by projections that home values will continue to rise through 2022.
Homeowners who want to improve their living standards are taking advantage of low rates offered on HELOCs and second mortgages, stated LoanMoz President Adam Light.
Home Remodeling Project Costs Have Soared Past $22,000 on Average in 2021
"Loan demand for homeowners looking to take advantage of record appreciation levels have driven up utilization rates," he said. "We expect demand will remain strong over the next five years." Property owners who are planning on kitchen remodeling projects, home additions, finishing basements and bathroom redesigns often will rely on a personal loan, cash-out mortgage loan, or equity line of credit to finance these projects, often driven by a borrowers credit profile, timeframe and amount of money that needs to be borrowed.
Personal loans have become the "fastest-growing segment for home improvement financing" according to LoanMoz. The company expects that by 2022 this type of loan will total $160 billion in outstanding balances.
Rates for home equity loan funding are averaging 4.97 percent with an average term of 11 years, according to its report. Meanwhile, the cost of borrowing on a HELOC averages 5.74 percent over 10 years and comes with no prepayment penalties."
Home Equity Financing Expected To Soar In 2021
The business cycle for home renovations and remodeling is more than five years long and is supported by strong demographics and economics behind the sector, said Light. He added that consumers' increased spending on
Home Renovation Spending in Canada is Up Nearly 23 Percent
The study found that the average cost of a home remodeling project has risen to $22,945 in 2021 from an estimated $18,976 a decade ago. That's a nearly 16 percent increase in 10 years. Improvements to kitchens and bathrooms are still driving spending but new technology such as smart thermostats, connected appliances and lighting controls are increasingly popular. Other common projects include installing hardwood flooring or stone countertops, building saunas or spas, new windows and patio doors, adding more square footage by finishing basements, or adding new rooms onto homes.
Kitchen Renovations on Average Range from $14,000 to $35,000 and higher in 2021
The industry is seeing "new sources of demand" that are raising the complexity and cost of renovation projects, said Light. More than ever before, home improvement retailers are catering to do-it-yourselfers who want to tackle their own renovations in addition to homeowners looking for more advanced remodeling ideas. But there are many challenges involved with these types of projects.