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Green Homes: Consumers Follow the Money

Chris Kramer

Chris Kramer, Sustainability Consultant at SWA

By Chris Kramer, Sustainability Consultant

What Homebuyers are Looking For

A report published recently by Shelton Group has found that current and potential homeowners prioritize the value of energy efficient features over other luxurious amenities. In their annual Energy Pulse study, Shelton Group found that 85% of potential homebuyers would be willing to pay for an ENERGY STAR® Certified Home and that the ENERGY STAR appliances would be a more valuable addition to their home than a pool, state-of-the-art sound system, or home theater. These findings are illustrative of a growing trend in the homeowner demographic to seek new ways of cutting annual energy costs. With the average American household currently spending $2,150 on energy bills, upgrading old appliances and light fixtures to new ones that use less energy can go a long way in reducing this annual expenditure.

High Performance Homes in the Marketplace

While homeowners benefit from efficient buildings on a monthly basis through lower utility bills, they are also in a better position as sellers when the time comes to move. In a September 2015 report, the nationally recognized residential appraiser, Sandra Adomatis, found that high performance homes (HPHs) sell for a mean premium of 3.46% based on a total of 40 surveyed homes on the market in Washington, D.C. Despite the expected price premium for HPHs, only 14.8% of those sold between 2008 and 2013 in D.C. were marketed properly (using applicable green field descriptors) in the local Multiple Listing Services real estate data sharing system. The potential for higher resale value for homeowners resulting from properly marketed home efficiency features will only improve as buyers become attuned to the benefits of HPHs. In light of the Shelton Group findings regarding efficient appliance preferences, it is likely that buyers will soon begin to broaden the scope of their search for energy cutting green features from electronics to the complex building system as a whole. Luckily, a grander force is now in place to draw the attention of consumers.

Other Benefits of Buying an Energy Efficient Home

For years, research has shown that energy efficient single-family homes have a much lower mortgage default rate. In the nationwide 2013 report Home Energy Efficiency and Mortgage Risks, the Institute for Market Transformation found that out of 71,000 ENERGY STAR and non-ENERGY STAR Certified Homes sold in the U.S., mortgage default risks were 32% lower for the ENERGY STAR homes, on average. The mounting evidence for lower mortgage default risks on efficient homes resulted in the passage of the Sensible Accounting to Value Energy Act in April 2016, as part of the U.S. Senate energy bill. This bill intends to improve the accuracy of mortgage underwriting to include the long-term value and affordability of owning and operating an energy efficient home. If HPHs become more affordable in the eyes of the consumer relative to their “inefficient” counterparts, it is probable that there will be a shift in home buying trends.

In light of recent reports, it is evident that a consumer preference for efficient appliances is only the tip of the iceberg when it comes to green features. With newly minted legislation and growing consumer awareness, it is only a matter of time before you will be hard-pressed to find a house on the market that does not highlight its energy saving features.

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