If you've seen crowds at Home Depot and Lowe's and your contractor seems to be backed up for months, you aren't alone. Home renovation activity has been on an upward trend along with home values in recent years. The latest update from the Leading Indicator of Remodeling Activity report compiled by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University forecasts growth in home renovation could be up 8.6% year over year by the second quarter of next year. Home improvement is a huge boost to the economy; in fact, by the middle of 2022, remodeling expenses could top $380 billion.
Funding home renovation
All of the funds for that activity aren't coming just from homeowners' pockets. For larger projects, some are taking on home improvement loans or HELOCs. While many homeowners use credit cards, awareness of the variety of home improvement loans is improving and a new deal could help increase that.
In June 2021, Regions Bank (NYSE: RF) announced that it is acquiring EnerBank USA, which is one of the country's biggest lenders for home improvement loans for both lenders and contractors. Many of EnerBank's loans are in HVAC and swimming pools, although it is also starting to enter the solar market.
As of March 31, 2021, EnerBank had $2.8 billion in loan balances. It has funded over $11.6 billion in home improvement projects total. It is operational in all 50 states. Regions is purchasing EnerBank from CMS Energy for $960 million and the deal is expected to close in the fourth quarter.
Regions has over $153 billion in assets and operates over 1,3000 banking offices. In its second quarter, it reported earnings of $748 million and earnings per share of $0.77. On the earnings call, John Turner, President and CEO of Regions Bank, said that the estimated total marketplace for home improvement loans is around $176 billion.
On the earnings call, Turner stated that EnerBank helps complete the company's lending strategy around all things home. Regions CFO David Turner noted that EnerBank currently represents only around 1% of all originations and that the acquisition should help EnerBank increase its market share.