High mortgage raꦬtes and home prices have kept m♔any Americans in place, upgrading their homes instead of moving. Experts say that could continue in 2025.

Homeowners have trillions of dollars of tappable equity in their homes, according to some estimates, which they could use to access Home Equity Lines of Credit (HELOC) to help fund renovations. Some housing market watchers, meanwhile, see an aging U.S. home supply as ripe for𒊎 updates🔯.

"For most people, it doesn't make sense financially to move," said Ben Carlson, director of Institutional Asset Management at Ritholz Wealth Management. "So if people are going to be staying in their houses longer, and they have all this equity just sitting there, for a lot of them, it's going to be hard to ignore."

Home improvement spending rose at an annualized 8% rate in the first half of 2024, according to Goldman Sachs economists, who said in a recent report that rising home equity "presents a tailwind for continued spending growth."

Rising Home Values, Low Mo🎃rtgage Rates Keep Homeowners in P💞lace

Americans' have seen their homes' values climb as competition in the housing market increased after the pandemic. The average homeowner gained $147,000 in housing wealth over the past five years, according to the National Association of Realtors.

As home values have reached historically high levels, more homeowners are taking out HELOCs. As of November, according to ICE Mortgage Technology, a housing and mortgage market data service, homeowners held $11.2 trillion in tappable equity, the portion of equity that a homeowner can access.

Meanwhile, homeowners who locked in low mortgage rates during the pandemic are unwilling to let them go for the higher rates available now. According to Goldman Sachs Research, 85% of mortgage borrowers have a rate below current market levels.

This has encouraged homeowners to stay in place for longer. Three-fifths of homeowners said their low mortgage rates influenced their decision not to sell and, instead, build up their home's growing equity, according to TD Bank.

Mortgage rates are expected to fall slightly above 6% next year, according to the NAR, lower than in 2024 but still higher than the majority of homeowners' mortgage rates. 

"With most homeowners locked into low-rate mortgages, lower rates will likely disproportionately boost spending on renovations," Goldman Sachs economists wrote.

Experts Ex💦pect Home𝄹 Renovations to Stay Popular in 2025

Renovations have been popular lately. More than half of homeowners said they completed a major home renovation within the past two years, according to a survey by Nationwide Insurance.

But they can also be expensive. About 78% of homeowners who took on a major renovation went over budget, and almost two-thirds went into debt to fund one, according to Clever Real Estate. More than half of homeowners who took out a home equity loan used it for renovations, accor🐠ding to TD Bank.

"Home equity loans are usually recommended for homeowners who want to remodel their home, as you are adding value to your home, which, in theory, will help you when you eventually sell the house or pass it on," Carlson said.

While lenders do not allow all equity to be borrowed, home equity levels have risen to the highest level ever recorded, totaling $35.1 trillion in October, according to Realtor.com. Lowe's Cos. (LOW) executives recently said they🐷 expect home values to continue to appreciate and disposable personal income to outpace inflation.

Meanwhile, they said, homes—which reached a median age of 41 in 2024, the oldest median age in U.S. history—will continue to age and need renovations.

“Existing homeowners are likely to continue investing in repairs and upgrades to their homes," said Marvin R. Ellison, president and chief executive officer at Lowe's, in its third-quarter earnings call. "Especially as interest rate pressures ease, we expect that homeowners will start to tap into the record $35 trillion in home equity to finance larger home improvement projects.”