A lot of people who over-improved did a cash-out refinancing when rates were at a low, expecting housing prices to continue going up and up. But in some places, like the Midwest, prices have already stopped climbing.
These days, projects are expensive. You don't have to do a lot of remodeling to spend a lot of money. What usually happens is you'll get a leak in your bathroom and you figure it's a good time to do a remodel. It's magnificent when it's done, but suddenly the rest of the house looks pretty shabby. There's a snowball effect where one remodeling project tends to lead to another.