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With record-low interest rates and home values at or above historic highs, many people are opting to remodel their existing homes instead of trying to find a new place that suits them and their budget. That’s a boon for remodeling contractors and lenders in the home equity loan and home equity line of credit (HELOC) markets.

Nationwide spending on residential remodeling is expected to top all-time highs by the middle of 2017, according to a new report from the Joint Center for Housing Studies of Harvard University. The report says Americans spent $297.3 billion on remodeling in the first half of 2016 and predicts a full recovery by the middle of next year.

“By the middle of next year, the national remodeling market should be very close to a full recovery from its worst downturn on record,” said Abbe Will, a research analyst at the Joint Center. “Annual spending is set to reach $321 billion by then, which after adjusting for inflation is just shy of the previous peak set in 2006 before the housing crash.”

Consumers Use HELOCs To Pay For Renovations

In the first half of 2014, there were 9,370 HELOCs sold in the Bay State, according to data from The Warren Group, publisher of Banker & Tradesman. In the first half of 2015, the number jumped more than 41 percent to 13,238. In the first half of 2016, 19,235 HELOCs were sold, a year-over-year increase of 45 percent and more than twice the number sold in 2014.

Bankers say the most common reason homeowners cite for wanting a home equity loan or a HELOC is to remodel their homes, followed by paying for a child’s education and wanting to have an open line of credit for emergency expenses.

Brendan Coughlin, executive vice president of consumer lending at Citizens Bank, said there are a combination of factors fueling the HELOC and remodeling booms: increasing consumer confidence, historically low interest rates and the one-two punch of rising home values. The ability to borrow more money against the value of their home makes remodeling an attractive alternative to moving, which can be much more expensive.

“Nationwide, HELOC sales were up 14 percent in the first half of 2016 and we reported a 20 percent increase during that time,” Coughlin said. “We are putting a lot of focus and marketing behind the business. If it’s done right, this product can result in bringing in new customers for other products and it’s going quite well.”

HELOC Market Is Increasingly Competitive

Community banks are also seeing a strong and strengthening HELOC market, according to Jon Auger, senior vice president of retail lending at Middlesex Bank.

“Our HELOC sales are very, very strong,” Auger said. “I think that when the mortgage market dried up, a lot of bigger lenders wanted to see if they could enter the home equity market. People weren’t buying or refinancing because rates were so high. We never turned away from it. It’s always been an area we’ve been very active in.”

Belmont Savings Bank’s HELOC sales are up “at least 20 percent” this year, according to executive vice president Chris Downs. Downs said he is also seeing a marked increase in competition for business from banks of all sizes.

“When we started developing the business over the course of the last six years, we were for a long time the only ones out there,” Downs said. “Then other community banks starting doing it. A lot of big banks are back in the last few years because they’ve seen their equity business eroding. We’re seeing a lot more competition especially in the last 6-8 months.”

Remodelers Find Homeowners Willing To Spend More

Remodeling contractors in Greater Boston say they’re busy – especially at the higher end of the market.

Sean Cutting, president of Cutting Edge Homes in Ashland, focuses on renovating existing spaces. He said a typical renovation project for his firm is in the $900,000 range and about 30 percent of his projects also involve some kind of an addition.

“Our typical client is under 50,” Cutting said. “They’re affluent, younger families with good jobs who want space that looks good and functions well. They always are mindful of environmental issues. Typically they want to stay in the home for 15 to 20 years and will see the benefits of those energy efficiency improvements.”

Cutting said his clients are spending more money on smaller, more environmentally sensitive homes.

“Without a doubt people are spending more than they used to,” Cutting said. “All of our projects include a highly functional kitchen opening to family room and master bedroom renovation. Lately people have been willing to stretch on luxury items. Heated toilet seats, audio-visual equipment and walk-in showers – what used to be considered luxury items are now a given.”

Peter Fallon of Fallon Homes and Renovation has been in the business for more than 40 years and said he is also seeing an increase in the renovation side of his business. He said his clients are staying in their big, expensive homes and renovating them, since more expensive home sales are slowing down.

“When their kids leave, they add space,” Fallon said. “People with 8,000 square foot homes are adding on because they want to have room for their grandchildren. We do renovations for people of all ages now, even people in their 80s. That wasn’t common in the beginning of my career.”

Fallon said it can vary, but his remodeling projects range from $500,000 to $8 million. With budgets like that his clients can get creative and he’s happy to help them do it.

“We add living space and storage space to master bedrooms, install his and hers bathrooms, wine cellars and media centers, too,” he said. “We build a lot of patios with fire pits, outdoor kitchens with bars. We often put in pools, tennis courts, sports court. At one house in Brookline, we even put in a 1-million BTU boiler under the pavement and the grass to melt snow.”