U.S. Homeowners Have $35 Trillion in Shared Home Equity

New York, NY, October 22, 2024--U.S. homeowners collectively have more than $35 trillion in home equity, reports the Wall Street Journal.

"More homeowners are borrowing against the rising value of their properties, suggesting that the worst of the remodeling slump has passed.

“Analysts and building-products executives are forecasting lower interest rates will fuel a rebound next year in spending on new kitchens, bathrooms and decks, reviving a reliable source of economic activity and stock-market gains.

“Spending on home repairs and renovations surged during the pandemic, when Americans were cooped up at home. Then it contracted for the first time since the aftermath of the 2008 mortgage meltdown, as the highest borrowing costs in a generation slowed home sales and made it expensive to tap home equity to pay for big jobs.

“Now, with the Federal Reserve cutting interest rates, the mountain of home equity that Americans have amassed thanks to sharply rising property values is getting cheaper to access.

The latest reading of a closely watched gauge of repair and renovation spending predicts a return to growth next summer. Spending should reach an annual rate of $477 billion by this time next year, Harvard University’s Joint Center for Housing Studies said last week. That would approach the record annual rate of $487 billion reached a year ago, before high rates took a toll.

“The drop in home sales has cut down on work undertaken to prepare properties for showings and by buyers fixing up houses to suit their tastes. Meanwhile, high interest rates made it unappealing to borrow against home equity, a common way of paying for big projects. 

“Though the slump has been relatively mild and is expected to be short-lived, the decline from record highs has dented building-products businesses.

"Rock-bottom borrowing costs and stay-at-home orders pulled forward a lot of remodeling projects during the pandemic. But over the past two years, expensive financing has prompted many people to defer pricey repairs and renovations, even as their home values continued to swell, according to John Burns Research & Consulting.

"Americans have more than $35 trillion in home equity, up 81% from the end of 2019, according to the Fed. That is an average of about $400,000 per U.S. homeowner, John Burns estimates.  

“'We think there’s $30 billion in remodeling spending just sitting on the sidelines today, waiting to be spent,' said Matthew Saunders, senior vice president of building products research at John Burns. 

"The firm recently polled 475 households that said they are waiting for lower rates to use home-equity lines of credit to fund projects. They broke down into two groups: 30-somethings planning work in the $60,000 range and older homeowners eyeing updates that will cost closer to $30,000."