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.