Just a few years ago, borrowers commonly withdrew money from their home equity lines of credit to pay for costly home remodeling projects. Since home values were going up so quickly, many assumed that the granite countertop and spa bathtub would pay for themselves with an increase in equity.

Looks like those days are long gone.

Home Depot recently announced a 24% quarterly decline. Executives say that fewer homeowners are willing to shell out for those big ticket projects. At this point, that $20,000 bathroom remodel is looking rather ridiculous.

The New York Times reports:

“Both Home Depot and Lowe’s, the world’s second-largest home improvement retailer, acknowledged that consumers had shied away from costly discretionary items. “During the quarter we continued to see soft demand in cabinets and countertops, and fashion plumbing,” Larry D. Stone, president and chief operating officer of Lowe’s Companies, said in a conference call with investors on Monday. Sales of repair and maintenance products, on the other hand, were solid.

Home goods retailers know all too well that getting a consumer to buy a new kitchen is nearly impossible these days. Instead Home Depot expanded its offering of low-priced items across the store, a tactic it said it thought made more sense than limited-time blowout sales.”

Those that took out HELOCs for pricey remodels are now feeling the fallout. In many urban areas, homeowners owe more than their properties are worth.

See Also:

HELOC Freeze Help

How to Qualify for a HELOC

Tags | Heloc, home equity line of credit, mortgage crisis