As green building pros know all too well, today’s recession-weary home buyers are often more concerned with price than with a home’s energy rating, durability, or indoor air quality. New research, however, reflects a steady increase in the public’s understanding of the value of green building features.
In fact, one analysis in the Portland, Ore., metropolitan area found that green-certified dwellings sold for up to 30% more on average. The study from Portland-based nonprofit Earth Advantage Institute, which analyzed sales data for May 2010 through April 2011 from the Portland Regional MLS, found that green-certified new homes, on average, sold for 8% more than non-certified ones. In one of the six counties reporting figures, the premium was more than 23%. Certifications came from Energy Star, LEED for Homes, Earth Advantage, or an Earth Advantage/Energy Star combination.
The difference in sales price was even higher for existing homes: an average of 30%, with one county reporting a premium of more than 61%. This is the fourth year in a row that the institute has done the analysis and found certified homes selling for more than conventional ones.
The information was supplied by real estate agents and is based on averages—not comparables—but even so, the study’s authors noticed a consistent trend, even while home sales in general were down: Third-party certification results in a higher sales price, says Dakota Gale, sustainable finance program manager at the Earth Advantage Institute.
PRICE PREMIUM
“There’s certainly a premium there to be had,” says green builder Josh Wynne of his Sarasota, Fla., market. He compares homes to cars, saying that people willingly pay more for a Bentley than a Kia, but also warns against turning green certification into a commodity or using it specifically to drive up profitability.
“Clients are naturally skeptical of green building,” he says. “If you’re disingenuous or sell green as an upgrade like a granite counter,” it won’t work.
Other green pros are seeing similar trends in their markets. For example, Salt Lake City-based Garbett Homes has earned a price advantage over competing builders in its market by offering energy-efficient solar- and geothermal-powered homes at prices attainable for first-time buyers.
The company, which builds in Utah, Idaho, Wyoming, and Missouri, sells its Energy Star-certified single-family homes and townhomes for roughly $14,000 more than those of competing builders, according to marketing director Rene Oehlerking. Garbett Homes calculated its price point to be a little higher than a traditionally built home, aiming for buyers willing to pay more–but not too much more. “Everybody wants to go green,” Oehlerking says, “but nobody wants to pay for it.”
Garbett Homes was the first production builder in Utah to feature solar thermal technology standard at a price point, after tax credits and rebates, comparable to traditional homes in the area.
Credit: Courtesy Garbett Homes
The hook, he says, is energy savings. All of the builder’s homes earn a HERS rating of less than 40, which, as the sales team points out to potential buyers, means a savings of between 60% and 80% on energy bills, Oehlerking says. The company’s homes have electric bills of about $5 a month and natural gas bills of about $7 a month.
New research from the Lawrence Berkeley National Laboratory of California shows that Garbett Homes’ green price premiums for solar-powered homes are not unique. In evaluating the price impact of photovoltaic energy systems, the Berkeley Lab analyzed some 72,000 homes sold in California between 2000 and 2009, of which about 2,000 included the systems. Compared with conventionally built homes, new homes sold for a premium of $2.30 to $2.60 per watt generated by the photovoltaic system, the laboratory found, while existing homes sold for a premium of $6 per watt. The study controlled for factors such as housing market fluctuations, neighborhood effects, and the age and size of the home.
WHAT’S IT WORTH?
Another study of green-certified home sales prices, in Atlanta, found more mixed results. Although certified homes sold for lower prices, on average, they did sell faster and closer to asking price, according to the Atlanta Green Home Sales Report from local Realtor Carson Matthews. In 2010, certified homes spent an average of 97 days on the market, compared with 123 for traditionally built homes. The homes were certified by EarthCraft House, LEED for Homes, and Energy Star.
One obstacle for green builders seeking higher prices is that appraisers rarely value green features enough, especially since the recession, says David Johnston, president of What’s Working, a green and low-energy consulting firm. “What advantages we used to have, at least according to appraisers, are gone,” Johnston says. “With house prices tumbling nationally, it doesn’t matter what color the house is.” Buyers are simply looking to get as many square feet per dollar as they can, he says.
A bit of extra effort on the seller’s part can help appraisers—and, hopefully, buyers—see the light. Phoenix-based GreenStreet Development has created a package to provide appraisers with information that helps distinguish between homes with green features and traditionally built homes, says Philip Beere, founder and president.
For example, a GreenStreet remodel listed in Tempe, Ariz., for $185,000 was first appraised at $140,000. The lender found another appraiser who was more familiar with green construction and Beere’s company, and the second appraisal came in at $200,000. Similarly, in Denver, a green-renovated home was appraised at 15% more than otherwise comparable homes on the same street.
“You have to establish that the property is special,” Beere says.
By: Diane Kittower, Ecohome Magazine
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