Most homeowners pay for repairs with cash, not home equity

Homeowners mostly pay for home improvements with money they already have, even after a sharp rise in home equity. Cash covered 63.8 percent of improvement spending in 2023, according to the Joint Center for Housing Studies at Harvard University.

That matters to contractors because a customer’s ability to pay may shape whether a job moves forward, what work gets approved, and when it happens. The figures also show why a homeowner’s home value does not always mean ready access to cash.

Cash leads, even for major jobs

Home improvement spending reached $405 billion in 2023, up 29.4 percent from 2019 after adjusting for inflation. Nearly 30 percent of homeowners did at least one improvement project that year, and the average homeowner spent $4,700, including owners who did no work.

Home equity loans, lines of credit, and cash from refinancing paid for 11.7 percent of spending. Insurance settlements covered 9.7 percent, credit cards 4.2 percent, and contractor-arranged financing 3.3 percent, according to the center’s analysis of the 2023 American Housing Survey.

The larger the job, the more likely homeowners were to use home equity. Cash paid for 73.9 percent of projects under $10,000, while equity-based financing covered 18.8 percent of projects costing $50,000 or more.

That does not mean equity has become an easy source of payment. Home equity grew by 74.9 percent between 2019 and 2023, but its share of improvement spending stayed nearly level, moving from 11.2 percent to 11.7 percent.

Essential repairs have a different funding mix

The funding method also depends on the kind of work. Home equity paid for 24.3 percent of room-addition spending and about 15 percent of kitchen and bathroom remodeling costs. It covered only 7.5 percent of spending on systems and equipment replacements, including plumbing, HVAC, and electrical work.

Those replacements are often needed to keep a home safe and working, so owners may rely on savings or other funds they can access quickly. Contractors should not assume that a homeowner can borrow against the house just because the home has gained value.

Insurance plays a much bigger role when the work follows a disaster. It covered 68.1 percent of disaster repair spending, while savings covered 20.6 percent. Insurance paid for 18.3 percent of spending on exterior replacements, such as roofing and siding.

Income also affects the options available. Home equity covered 4.9 percent of improvement spending for the lowest-income homeowners, compared with 15.2 percent for the highest-income group. The center says the gap may reflect differences in equity, access to borrowing, and the kinds of projects households take on.

Savings covered a similar share of spending across income groups, but lower-income homeowners spent less than a third as much on improvements as higher-income owners. That leaves some households with fewer ways to pay for major work, even when their homes need repairs.

What contractors can do this week

The figures point to a practical lesson: make the cost and payment choices clear before work begins. Contractors cannot control a customer’s access to savings, credit, or insurance, but they can help customers understand the job and decide what to do next.

• Separate urgent repairs from optional upgrades in estimates, so customers can see what needs attention first.
• Offer written estimates with clear scope, payment timing, and any available financing terms. Do not imply that a loan or insurance claim is guaranteed.
• For storm-related work, document damage and explain what information the customer may need for an insurance claim, without promising what the insurer will cover.
• Follow up with customers who delay, ask whether the scope or timing needs to change, and record the reason so the business can plan future estimates.

TopicService Providers