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Analyzing whether or not green certified homes are worth more

I’ve written several articles about  green homes as well as the steady growth of the green building industry and by far the most common question I get is; are green certified homes actually worth more than non certified comparable homes?

There is a statistic out there I’ve seen on sites such as Energy Star and RESNET that states for every $1 a home saves in energy cost, it’s value increases by $10-$20.   With average annual energy costs at about$1800 per household and green homes performing about 20-50% more efficient than standard, it stands to reason a green home would be worth anywhere from 2k to 20k or more in value.

Is That Translating in the Market Place?

The transparent and frank answer is, not yet.  I have looked at blogs from green builders, appraisers, and industry insiders.  I’ve studied market reports and read press about the phenomenal growth of the green building industry and there is definitely real market data the supports the value of green building and green home ownership.   The homes are performing and homeowners are reporting dramatic energy costs reductions. The average new construction green home sells much faster and green builders are not having to make the dramatic price reductions to get their product sold.  I recently created this report for a presentation at our local green building council luncheon about green home sales in the Nashville area.  This is a straight forward statistical study of our MLS active, pending, and closed data and it’s gratifying to know that we are performing consistently with national trends.

For all the Green Building Naysayers

It would be easy to use data like this to make the case for green building being a fad that doesn’t seem to be translating in to additional value.    However, the issue is more complex because the green building industry is hampered by a number of factors that aren’t related to lack luster consumer demand.

  • Many MLS’s  still do not have green search able features or the green builder certification. Here is the list of what we have added to the Middle TN MLS.  Having trackable data allowed me to create the above referenced report and will allow appraisers to find comps, measure demand, and growth.
  • Appraisers need to get educated on green building and all of the upgraded components that may not be as visible as say granite counter tops.  The appraisal institute is now offering some training and guides. Appraisal guidelines also need to be revisited as they offer very little adjustment for utility savings or longer life cycle building products.
  • Lenders (fannie and Freddie both) need to create energy efficient mortgages with some teeth.  The current energy efficient mortgages are rarely used due to lack of knowledge and lack luster incentives to consumers.  Often in the appraisal review process, the lender will over turn appraisals that have given credit for green features therefore further hampering growth.   I am excited that the Obama administration is so supportive of green building and green retrofitting but consumers need to be able to finance them.

With NAR reporting growing numbers of consumers with a desire to own more efficient homes, we should all be confident that the market is there.  It’s a chicken or egg question on what will swing the value pendulum in a more favorable direction. We can certainly participate in the conversation though.

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Written By

Anna Altic – Village Real Estate Services. I’ve called Nashville home for the last 15 years and have been practicing (practice being the key word here) real estate for just over 6 years. In the fall of 2007, I went to a local German Festival that had a home tour, including a LEED certified property, and I instantly became enamored with the idea of eco friendly living (ok, so I’d had a little beer and the dual flush toilet rocked my world). I have since devoted much of my time and energies in to studying and espousing the benefits of better building technology within our local residential market and my proudest accomplishment thus far has been successfully leading the initiative to get over 25 green features added to our MLS search fields.

25 Comments

25 Comments

  1. BawldGuy

    November 21, 2010 at 2:13 pm

    Of course it’s not translating. The so-called ‘green’ movement must first overcome all the BS they’ve been puttin’ out for so long. That said, there are some very smart people who’re doing just that. Once those who’re now telling the truth about ‘green’ become the standard, they’ll overcome the ‘save the planet’ whackos who’ve been poisoning the well for decades. Foolin’ me once is on them. Foolin’ me 1,287 times? Gimme a break.

    I met, belly to belly, for over an hour with one of the ‘green’ good guys last week. It’s my contention he’s in the distinct minority, but is very quietly becoming exceptionally popular — with paying customers — based upon his ability to communicate MARKET advantages of going ‘green’.

    Of course, the reasons he’s so popular, are twofold. First, he’s not perpetuating the laughable crappola his counterparts have been puttin’ out since the 60’s like carnival barkers. Second, and much more important? He’s successfully showing investors how saving the planet is horse pucky. He’s showing them that ‘green’ is synonymous with dead presidents.

    Like Grandma said, “The truth wins in the end.”

  2. Fred Griffin

    November 22, 2010 at 11:31 am

    Chad, aka BawldGuy, nailed it.

    The “Green Movement” is so stained by Chicken Littles and Profiteers, that no rational person can take it seriously.

    Al Gore flying his 757, then driving a few blocks in a motorcade to give a speech demanding that we stop using gasoline.

    The Ice Age that we were warned about in the 1970’s. The Global Warming outright Lie that has brought discredit to Scientists everywhere.

    The Wind Generators banned by John Kerry because they would affect his view of Nantucket, and the Solar Panels banned by Feinstein because of some Lizard in the desert.

    California is in the process of outlawing Wood-Burning Fireplaces, because they produce 4 tons of soot a day, or so we are told.

    Until we can distance ourselves from the Eco-Terrorists, the PETAs, the Global Warmers, and the Political Charlatans, “Green” will continue to bring up images of aging Hippies in a banged-up 1991 Toyota Camry covered with New Age bumper-stickers.

    Oops, gotta go… my wife just dropped one of those new Mercury Vapor “Green” Light Bulbs, and I will have to call the EPA guys in space suits to clean it up. 😉

  3. BawldGuy

    November 22, 2010 at 11:35 am

    Who’s Chad? 🙂

  4. Agent for Movoto

    November 22, 2010 at 4:09 pm

    Great article – about time someone took a hard statistical look at this stuff. I think that eventually green homes will be the obvious choice – there’s just too much cheap, foreclosed, non-green merchandise crowding the market right now.

  5. Fred Griffin

    November 23, 2010 at 3:19 pm

    Hey Jeffrey! My bad…

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