Historically, home equity loans have been an important source of funding for home improvement spending. The following analysis demonstrates this relationship and examines what impact recent declines in home equity loan use have had on the remodeling sector, as well as the positive effects of the residential energy-efficient tax credits.
In particular, as home equity withdrawal declined during the Great Recession, remodeling spending fell. But the decline in remodeling activity was tempered by the existence of the tax credit programs.
According to the Census Bureau’s American Housing Survey (AHS), in 2005, 48% of home equity loan dollars were used for home improvement. That percentage has grown in recent years, increasing to 49% in 2007 and 51% in 2009 (the most recent edition of the AHS).