At a time when traditional purchase and refinance deals are expected to take a step back, mortgage lenders may be looking more closely at a space they’ve previously avoided — home equity.
For lenders, the business opportunity across home equity lines of credit (HELOCs) and related products is massive. U.S. homeowners held $35 trillion in equity at the end of 2024, according to Federal Reserve data. About half of that was held by homeowners with mortgages, with roughly $11.7 trillion considered tappable based on keeping a 20% equity cushion in the property, more recent data from Intercontinental Exchange shows.
Older Americans represent a significant share of that pie, having accumulated more equity over a longer life span. But their homes are often aging with them, and it may not be cost-effective for them to downsize or find something comparable in today’s higher mortgage rate climate. This drives the need for financing to pay for renovations and expansions.
This is where Raf Howery looks to serve a purpose. His company, California-based Kukun, has launched a proprietary dataset, the Renovation-HELOC Index. The founder and CEO told HousingWire that he aims to help mortgage companies identify potential home equity borrowers who are already in the process of sprucing up their home.
What’s the purpose?
The inaugural quarterly index, released Wednesday, assigns a score to every state, county and ZIP code based on the likelihood that a homeowner will tap into their equity for renovation purposes. The index is benchmarked to a market average of 100 — meaning that a ZIP code with a score of 200 has twice the demand of its neighbors, while a score of 50 indicates demand at half of the average.
Using its in-house dataset for building permit issuance, Kukun weighs these numbers against U.S. Census Bureau property totals to determine how many permits are being issued per 1,000 homes. This ratio is weighted by the value of the homes being renovated and divided by the average value across the parent market. Only permits valued at $40,000 or more are included in the index.
“We started to collect permit data about 10 years ago, and we started to see a lot of value in that data to do a lot of different things,” said Howery, who previously worked as a consultant at KPMG.
“We’ve been working with banks and lenders in general. We license some software for them, and so we started to see a connection between HELOCs and permits,” he added. “We know that half of HELOCs are usually for renovations, and so I wanted to build that relationship. I wanted to see, is there a correlation? Is there a timing that would be relevant to understand for the lenders? If I’m a mortgage servicer, does it make sense to monitor who’s doing what on my portfolio?”
Kukun plans to publish fresh data on a quarterly basis moving forward, with Q3 2026 serving as a baseline. Subsequent reports will track movement, with ZIP codes showing large increases or decreases in their scores representing meaningful growth or declines in homeowner intent. The index could provide clues for lenders and servicers on how and where to deploy their marketing budgets.
What does the data say?
The inaugural index report includes the raw permitting data at the state level, which unsurprisingly shows that the largest states lead the way for activity. California issued 50,897 renovation permits from July through September, followed by Florida (36,975) and Texas (13,029). Nine other states — led by Missouri, North Carolina and Georgia — issued at least 6,000 permits in Q3 2026.
The top three states on that list happen to be the same ones that led the way for HELOC originations in 2024, according to Home Mortgage Disclosure Act data analyzed by Kukun. In California, Florida and Texas, homeowners took out at least 474,000 HELOCs and $170 billion in volume that year.
Further digging, however, shows that across most U.S. metros areas, five to 10 ZIP codes are responsible for the majority of all renovation activity. The analysis included six examples where the top 10 neighborhoods generated a high share of activity for the larger metro area, which typically has dozens of ZIP codes.
- Palm Beach, Florida: 70%
- Charlotte: 67%
- Austin: 58%
- Santa Clara, California: 51%
- St. Louis: 50%
- Fairfax, Virginia: 39%
Kukun also found that wealthier neighborhoods are not always responsible for the largest and most expensive renovation projects.
In Palm Beach County — where the median list price is $869,900, according to HousingWire Data — 58% of the renovation work involved smaller projects, like bathroom and kitchen upgrades. In Charlotte and surrounding Mecklenburg County, North Carolina, where the median list price is $519,000, 65% of the work was tied to pricier additions and gut renovations.
Accessory dwelling units (ADUs) represent larger projects that can be funded through home equity. While the report shows California is the clear leader in this category — having built nearly 26,000 ADUs in the third quarter alone — states like North Carolina, Washington, Arizona and Florida also have measurable demand.
ADUs often require a capital commitment of $150,000 to $300,000, making them good targets for HELOC originations that can potentially be repaid through a steady stream of rental income, Kukun reported.
Howery said there’s a clear signal to challenge the typical lender or servicer assumption: Borrowers do not typically apply for a HELOC before filing for a permit. “Most people will apply for the HELOC seven or eight months into the project,” he explained.
They also tend to fund the initial costs with a credit card or personal loan before the size and scope of the project becomes larger and clearer. “The appetite for doing more work, as you experience demolition, as you experience noise, you start to say, ‘Well, I don’t want to live through this again,’” Howery remarked.
This also means that home equity lenders should have more patience.
“It’s not like the [first] mortgage where you apply, you get it and you’re done. You have to be their companion along the way,” Howery said.
