Editor's note: This article was updated to reflect the correct name for University Federal Credit Union.

For Christina Legrand, a Cedar Park resident and real estate agent, her home in Cypress Bend is almost unrecognizable from when she and her family moved in 14 years ago.

Shortly after moving into their home built in 1991, Legrand and her husband began scraping the popcorn ceilings, painting walls and installing new flooring. Now the once-traditional red brick home has a modern black and white exterior and interior with a renovated kitchen, new windows, a new roof, a chimney, a fireplace and a screened-in patio.

“Your house is your biggest investment,” Legrand said. “You can’t just let it fall apart around you. You have to maintain it.”

Due to high interest rates and a decreasing number of new homes on the market, some Cedar Park and Northwest Austin homeowners such as Legrand are choosing to renovate instead of relocating, shedding light on the growing home renovation industry locally and nationwide, local industry experts said.

A rise in renovations

Homebuyers have much higher expectations for the quality of their future home than homebuyers during the housing market peak from summer 2021 to March 2022, said Jim Mayo, a real estate agent in Williamson County. “In 2021, you just put a sign in the yard, and the house is going to have double-digit showings,” Mayo said. “Now you have to market the home; you have to have good curb appeal, touch up paint.”

Homebuyers are looking for the most-updated move-in-ready homes, Mayo said. While they might not expect a 20-year-old home to be remodeled, they are expecting to pay less to compensate for needed improvements and updates. Mayo estimated typical renovations can increase the value of a seller’s home by 20%.

Small improvements, such as new landscaping, paint touch-ups and detail cleaning on tile, can bring the biggest returns on investment. While major renovations, such as new windows or countertops, may not yield the same returns, they will make a house sell faster, Mayo said.

A rise in renovations also reflects an uncertainty homeowners feel about selling in the current market, Mayo said. Cedar Park and Northwest Austin homeowners who are locked into a low interest rate and a high homestead exemption are choosing to invest in their homes instead of starting over in a costlier market.

“They are using their money in their equity to fix their house, to add a pool,” Mayo said. “They’re choosing to stay put instead of moving.”

Contractor demand

While interest rates are high, so is the demand for contractors and home renovations. Charlie Solis works as an estimator, seller and project manager for Austin Jones Company, a remodeling contractor based in Austin that serves the Greater Austin area. With over 35 years in the industry, he’s seen firsthand the shift in the market with people opting to make their homes work rather than seeking to move.

Inflation in general has affected contractors as the cost of materials has gone up over the last few years. However, rising interest rates have also caught up to contractors. Solis said calls have slowed over the past six months or so—something that is not normal going into the summertime—and homeowners are sitting on their estimates longer than they used to as they decide if the costs are feasible and if the renovations are necessary.

Located off Anderson Mill Road, Cabinetto is a full-service cabinet retailer and remodeling business providing services to the Greater Austin area. Owner Adnan Cokadar said contractor demand is still present despite interest rates and inflation slowing the market down across the board.

“The building is continuing because you have to produce more new homes,” Cokadar said. “The internal immigration—people are still moving to Austin. It’s still attractive.”

Financing renovations responsibly

Financial experts said they’ve seen an increase in individuals using their home equity, specifically home equity lines of credit, to financing projects.

Home equity is calculated based on the difference between what a home is worth and how much a homeowner owes, for up to 80% of the home value minus what is owed, said Jake Bernhard, vice president of real estate lending for United Heritage Credit Union.

The amount of home equity lines of credit issued by UHCU increased by 154% from 2019-22. Many of the HELOCs were used to finance home renovations, Bernhard said.

“A lot of people feel that they’re stuck in their current house, because they’re focused on what their current mortgage rate is,” Bernhard said. “They’re limiting themselves into staying in their house, and then doing the HELOC to maybe make their house into what they want the house to be.”

A home equity loan functions as a traditional loan with a fixed interest rate and closing costs, Bernhard said. With a home equity line of credit, homeowners can draw out funds gradually, only owing money and paying an adjustable interest rate for what they need with no closing costs for amounts $200,000 or under.

“Very rarely does the project stay exactly on budget,” Bernhard said. “If you get halfway through the project, and you realize that everything is becoming more expensive, and we’re running out of money, you might be putting yourself in a bind.”

Other financing options for home renovations include cash-out refinancing, financing through contractors, or using a personal debit or credit card, Bernhard said. Due to a rise in interest rates in recent years, refinancing has been a less popular means for home renovations, he said.

The best financing method for home renovations depends on each individual’s situation and the cost of the project, said Joe Gonzalez, assistant vice president of consumer lending and lending innovation for University Federal Credit Union.

“It’s just like any other thing that you would budget for,” Gonzalez said. “See what your budget looks like, and then set a goal, and then set it aside and start saving for it.”

Bernhard recommends taking out an additional savings account for home improvement projects and depositing what a monthly loan payment would be on a project before beginning to assess if it is financially feasible.

Weighing the decision

While interest rates and inflation continue to affect the real estate and home renovation markets, Austin seems to remain an attractive option for both potential buyers and homeowners.

Solis said Central Texas homeowners will “never lose money” by spending money on renovations.

“If you know you’re going to stay there and you have no plans on leaving for quite a while, I wouldn’t worry about [getting your money back when you sell],” Solis said. “Do it the way you want it. Who knows how the market is going to go.”