American Homeowners Would Rather Renovate Than Buy a New Home Amid High Interest Rates and Inflation

Today’s high interest rates are having a profound effect on the housing market, causing most Americans looking to buy a new home to rethink their options, and many homeowners to revisit home renovation alternatives according to a recent survey from Discover Home Loans.

A whopping 84 percent of respondents who were planning to buy a new home say interest rates have affected their decision—nearly half (46 percent) saying they are no longer looking, 35 percent say8ing they are less committed in their search and 30 percent lowering their budget. For most in this group, rates would need to fall significantly with 66 percent of respondents planning to wait for 30-year mortgage rates to dip below 5 percent before they would seriously consider purchasing a home.

“When the Fed does gain confidence that inflation is under control, rate decreases are likely to be modest and gradual,” says Rob Cook, vice president of marketing at Discover Home Loans. “In the meantime, the housing market may remain sluggish. Consumers should reset their expectations and budgets accordingly.”

More than half (55 percent) of American homeowners say they would rather renovate their current home versus move to a new home (24 percent) or keep their home “as is” (21 percent). In fact, 57 percent of survey respondents either have a home improvement project underway or are planning a project within the next year. For those planning a home improvement project, 87 percent want to make cosmetic changes to reflect their personal style; 84 percent want to use home improvements as an investment opportunity; and 73 percent want to upgrade home features in need of repair.

But inflation and interest rates are even affecting those plans for home improvement, with 33 percent of respondents saying they are choosing to delay home renovation projects. For those who pursue home renovations, 47 percent indicate their project is costing more than they expected and 30 percent stating they have reduced the size of their project.

The national survey of 1,500 homeowners was commissioned by Discover and conducted by Dynata (formerly Research Now/SSI), an independent survey research firm. The survey was fielded from February 9th through March 13th, 2024.