Energy Efficiency and the Real Estate Market
The issue of energy efficiency is increasingly in the minds
of homebuyers and finding its way into governmental regulations.
However, the lesser known but greater market impact of energy-efficient
homes is in improved home quality and value. These translate
into greater satisfaction with a home purchase and homebuyer
qualification for energy-efficient loans designed
to recognize the utility savings of energy-efficient homes.
Increased Home Value
An energy-efficient home has a higher value than a similar
home that is less efficient. Studies published in the Appraisal
Journal in 1998 and 1999 documented an approximate $20 increase
in a home’s market value for every $1 decrease in annual
energy costs. The decreased utility usage appeals to all kinds
of homeowners whether their motivation stems from reduced
environmental impact or home operating savings or a combination
of each.
Expanded Purchasing
Power
The secondary mortgage market, including Fannie
Mae, Freddie Mac, FHA, VA, Rural Development, and CHFA, has
acknowledged the added value of energy-efficient homes by
offering homebuyers the Energy Efficient Mortgage (EIM) and
the Energy Improvement Mortgage (EIM). Both of these mortgages
credit the lower utility costs of the home, increasing the
mortgage amount offered, thus allowing homebuyers greater
purchasing power. For lower income or first time potential
homeowners, this added purchasing power might even make the
difference in qualifying for a loan.
Quality
and Customer Satisfaction
Energy-efficient homes
are also higher quality homes that produce greater customer
satisfaction in the new homeowner. While home buying may be
all about location, a homebuyer’s post-sale satisfaction
is attributable to many other factors, as presented by J.D.
Power at the 2002 Energy and Environmental Building Association
(EEBA) National Conference. In fact, new homeowners’
satisfaction hinges largely on issues related to the builder’s
customer service and quality of workmanship. The City
of Fort Collins 2002 study of energy efficiency indicated
increased complaints and comfort issues in homes meeting only
minimum building standards. Selling energy-efficient homes
can help realtors improve their customers’ satisfaction,
thereby promoting referrals and return business.
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