Homeowners with more equity want to improve their homes

As the housing market has improved, homeowners have seen their home equity levels rise. However, in the difficult lending environment that consumers are currently experiencing, it can be difficult to tap into this home equity to finance remodeling projects. Institutions reportedly remain hesitant about providing home equity lines of credit at a time when more homeowners are interested in restoring their properties, according to a new report from Fitch Ratings. The home improvement sector still faces challenges, such as elevated unemployment levels and weakened consumer confidence. Making sense of the story According to Compass Point Research & Trading, homeowners have watched their equity increase $571 billion in the second quarter of 2013 and $2.2 trillion over the past year. If institutions change course, rising equity could support the issuance of home equity loans by banks and potentially increase the pool of borrowers eligible for refinancing. While lending standards remain tight, another hurdle is banks, thrifts, and credit unions have not explored various products to tap into a new market of profitability, according to Business Loan Connection. For example, one loan product specifically focuses on home improvement loans, which goes up to roughly $30,000. The Fitch Ratings report notes that remodeling spending is expected to pick up for the remainder of the year and into 2014 since more homeowners are revisiting restoration projects they previously deferred.  Homeowners are now more willing to undertake discretionary projects and purchases, whereas most investments in home improvements over the past few years were focused on necessities.