Homebuyers are not only increasingly interested in high-performance homes, or homes incorporating green features, but they are also willing to pay more for them, according to a new study released today by the Institute for Market Transformation (IMT) and the District of Columbia's Department of Energy and Environment (DOEE).
"What is Green Worth? Unveiling High-Performance Home Premiums in Washington, D.C.," released by IMT and funded by the DOEE, finds that high-performance homes marketed with green features (such as a solar photovoltaic array or LEED certification) sell for a mean premium of 3.46 percent compared to homes without green features.
“With American households spending around $230 billion each year on energy, the real estate market is beginning to recognize the true value of high-performance homes. Not only do these homes mean lower monthly energy bills for homeowners, but our prior research has also found that homeowners of energy-efficient homes are 32 percent less likely to default on their mortgages,” said IMT Executive Director Cliff Majersik. “This study further emphasizes the value of high-performance homes and showcases that home sellers, realtors, and appraisers who are not factoring in energy efficiency when selling a home are leaving money on the table. This is important not just in the District of Columbia, but across the United States.”
In pairing high-performance home sales with multiple non-high-performance home sales, the study also identified current barriers in the real estate transaction process that may be preventing home sellers from receiving the full market value of their high-performance homes. While the study’s comparisons and conclusions clearly demonstrate that homebuyers are willing to pay more for high-performance homes, the multiple listing service, or MLS, does not adequately collect and showcase data on green features. In addition, the market is in need of real estate professionals with knowledge of green building principles and practices in order to better market high-performance homes.
“This study, one of the first of its kind, employed an appraiser-led technique to value green features in homes and it produced a credible set of quantifiable results” said Sandra Adomatis, SRA, LEED Green Associate, founder of Adomatis Appraisal Service and author of the report. “These findings are critical to support the growing movement to properly value high-performance homes.”
The full report is now available online at http://tinyurl.com/p695np8.
...
The complete dataset for this analysis consisted of 32 High Performance Home (HPH0 transactions and 32 non-HPH (comparable) transactions.... Eight out of 32 HPH sales could be paired with similar non-HPH sales to develop credible results without excessive adjustments. Each of the eight HPH sales was paired with three or more non-HPH sales that were similar in all aspects except green features."...
The five sales compared to [the first home in the paired sale analysis (P1)] support a mean sales price premium of 3.33 percent for the green features, which include a 6kW solar PV system. The premium range is $17,000–$36,500."... This property has a 6kW (6,000 watt) system according to the MLS. Aerial mapping provided sufficient information on the system’s orientation so that the PV Value calculation could be completed.... Using the income approach, the value of the solar PV system was estimated to range from $13,698-$16,383 (or $2.28-$2.73 per watt)...The 30 percent federal tax credit is not included in the depreciation amount. Excluding this tax credit, a local builder reports incentives of $0.96 per watt, and a solar sales company reports $1 per watt. For this study, $1 per watt is applied for the depreciation. Based on the cost approach, the 6kW system was valued at $13,800. The 6kW solar PV system is valued at $13,800 based on the cost and income approaches to value. The reconciled value is equal to the cost approach value and falls at the lower end of the range determined using the income approach.... For this HPH, the mean green premium is $24,143. Deducting the indicated solar PV value from this overall green premium reveals a green feature premium, excluding solar PV, of $10,343
"What is Green Worth? Unveiling High-Performance Home Premiums in Washington, D.C.," released by IMT and funded by the DOEE, finds that high-performance homes marketed with green features (such as a solar photovoltaic array or LEED certification) sell for a mean premium of 3.46 percent compared to homes without green features.
“With American households spending around $230 billion each year on energy, the real estate market is beginning to recognize the true value of high-performance homes. Not only do these homes mean lower monthly energy bills for homeowners, but our prior research has also found that homeowners of energy-efficient homes are 32 percent less likely to default on their mortgages,” said IMT Executive Director Cliff Majersik. “This study further emphasizes the value of high-performance homes and showcases that home sellers, realtors, and appraisers who are not factoring in energy efficiency when selling a home are leaving money on the table. This is important not just in the District of Columbia, but across the United States.”
In pairing high-performance home sales with multiple non-high-performance home sales, the study also identified current barriers in the real estate transaction process that may be preventing home sellers from receiving the full market value of their high-performance homes. While the study’s comparisons and conclusions clearly demonstrate that homebuyers are willing to pay more for high-performance homes, the multiple listing service, or MLS, does not adequately collect and showcase data on green features. In addition, the market is in need of real estate professionals with knowledge of green building principles and practices in order to better market high-performance homes.
“This study, one of the first of its kind, employed an appraiser-led technique to value green features in homes and it produced a credible set of quantifiable results” said Sandra Adomatis, SRA, LEED Green Associate, founder of Adomatis Appraisal Service and author of the report. “These findings are critical to support the growing movement to properly value high-performance homes.”
The full report is now available online at http://tinyurl.com/p695np8.
...
The complete dataset for this analysis consisted of 32 High Performance Home (HPH0 transactions and 32 non-HPH (comparable) transactions.... Eight out of 32 HPH sales could be paired with similar non-HPH sales to develop credible results without excessive adjustments. Each of the eight HPH sales was paired with three or more non-HPH sales that were similar in all aspects except green features."...
The five sales compared to [the first home in the paired sale analysis (P1)] support a mean sales price premium of 3.33 percent for the green features, which include a 6kW solar PV system. The premium range is $17,000–$36,500."... This property has a 6kW (6,000 watt) system according to the MLS. Aerial mapping provided sufficient information on the system’s orientation so that the PV Value calculation could be completed.... Using the income approach, the value of the solar PV system was estimated to range from $13,698-$16,383 (or $2.28-$2.73 per watt)...The 30 percent federal tax credit is not included in the depreciation amount. Excluding this tax credit, a local builder reports incentives of $0.96 per watt, and a solar sales company reports $1 per watt. For this study, $1 per watt is applied for the depreciation. Based on the cost approach, the 6kW system was valued at $13,800. The 6kW solar PV system is valued at $13,800 based on the cost and income approaches to value. The reconciled value is equal to the cost approach value and falls at the lower end of the range determined using the income approach.... For this HPH, the mean green premium is $24,143. Deducting the indicated solar PV value from this overall green premium reveals a green feature premium, excluding solar PV, of $10,343
by Sandra Adomatis
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