As home prices increase, many homeowners are choosing to improve their current homes instead of looking at upgrading to new ones, and for larger projects, they're taking a loan to finance the renovation, according to a study by LendingTree.
The study analyzed where homeowners were taking out home improvement loans the most by looking at Home Mortgage Disclosure Act (HMDA) data for 2017, which covers 7.3 million loans. The study ranked the 50 largest U.S. cities by the volume of home improvement loans as a percentage of the total housing units in the city.
LendingTree found that home improvement loans were taken out on less than 1 percent of homes in 2017. "This may seem low, but it doesn't necessarily mean folks aren't updating their homes,"LendingTree said. "Many home improvements are financed by savings, other types of credit and other types of mortgage loans such as cash-out refinances and HELOCs."
Localized factors also accounted for renovation activity, the study indicated, going by the locations with high rates of home improvement activity. The study found that Oklahoma City had the highest rate of homeowners taking loans for home renovations, with 0.77 percent of homes having a loan originated in 2017. "The city has been growing rapidly and is one of the most spread out cities in the country, meaning homeowners have lots of room to work with," the study said. It indicated that the median loan amount that borrowers took for home improvements in this city was $15,000.
Coming in second was San Jose, where, according to the study, homeowners were adding all the latest bells and whistles to their homes. In keeping with its reputation for being one of the most expensive cities for housing, the home improvement loans in San Jose averaged at $374,000. Salt Lake City, Utah, where borrowers took a median home improvement loan of $130,000 was ranked third by the study. Pittsburgh, Pennsylvania and Boston, Massachusetts, rounded off the top five cities.
The study also ranked cities with the least home improvement loans to their names. New York, it found, had the lowest rate of homeowners taking loans for home improvement, followed by Miami and Houston.