U.S. Homeowners Tap Equity for Renovations Amid 7% Mortgage Rates High Prices 60% of Millennials 56% of Gen Z Plan Projects

Homeowners in the U.S. are increasingly leveraging home equity to fund renovations rather than selling their properties, as persistently high mortgage rates and inflated home prices eliminate the incentive to move. With mortgage rates nearing 7% and starter homes in many markets reaching or surpassing $1 million, younger generations—particularly millennials and Gen Z—are opting to upgrade their existing homes instead of pursuing larger or newer properties. A June survey by This Old House reveals that 60% of millennial homeowners and 56% of Gen Z homeowners have renovation plans this year, signaling a cultural shift toward functional and value-driven home improvements [1].

The decision to renovate is driven by multiple factors. First, current homeowners are reluctant to exit the market given the sharp rise in mortgage rates compared to the pandemic-era rates below 3%. Second, high home equity levels provide access to affordable financing options such as home equity lines of credit (HELOCs), which allow renovations to be funded with manageable monthly payments. Third, demographic trends show an aging population remaining in their homes longer, while new zoning rules facilitate expansions like accessory dwelling units (ADUs) or converted spaces for family or rental use. As Liz Young, CEO of home-renovation platform Realm, explains, “There’s just no incentive right now for a consumer to leave their home and disrupt that low [mortgage] rate.”

Renovations are also proving more cost-effective than purchasing new homes. Realm’s data indicates that renovating an existing home saves an average of $49,000, while expanding it saves $79,000 compared to buying a new property. These projects, often clustered together to minimize disruption, include kitchens, bathrooms, and outdoor living spaces. The pandemic has amplified demand for outdoor upgrades, such as hardscaping, pools, and fluid indoor-outdoor setups, reflecting a broader redefinition of the “American dream.” Young notes, “People no longer expect to buy their perfect home out of the gate. Instead, they’re building value incrementally through renovations.”

The trend underscores a fundamental shift in how homeowners approach property ownership. Rather than viewing renovations as temporary fixes, many are treating them as strategic investments to enhance livability and equity. This approach aligns with the financial reality of a constrained housing market, where limited inventory and high costs force buyers to prioritize upgrades over relocation. As a result, the home improvement sector is seeing increased activity, with companies like Realm facilitating $200 million in projects annually.

The market’s dynamics suggest a prolonged period of stagnation for home sales, with renovations becoming a key driver of housing market activity. By prioritizing functional upgrades and cost-effective expansions, homeowners are adapting to an environment where mobility is no longer the norm.

Source: [1] [Homeowners are pouring their equity into renovations because there’s ‘no incentive’ to sell in today’s housing market] [https://fortune.com/2025/07/24/homeowners-renovations-home-equity-heloc-housing-market/]