The Market for High-Performing Homes
Overview of the prevalence of high-performing homes and features
High-performing homes provide building occupants, homeowners, and/or investors with reduced electricity bills and often have associated non-energy benefits such as enhanced comfort, better indoor air quality, and improved building durability that appeal to virtually all market actors.
A subset of market actors also value the “green” benefits of homes that use less energy, such as reduction of global carbon emissions and/or reducing local and regional air pollutants that are emitted from coal and other fossil fuel power plants. The prevalence of high-performing homes has continued to grow at an accelerating pace over the two decades. In new construction, a home built to the most recent energy code is almost twice as efficient (uses half the energy) as a home built in 2006.
Despite these higher minimum standards (i.e.,energy codes), many builders are going much further. Almost 10% of new homes meet above-code ENERGY STAR standards, with market penetration rates as high as 40% in some states.
In existing homes, energy efficiency upgrades are some of the most sought-after home improvements. This all means that appraisers are encountering energy efficient homes at an increasing frequency in both refinance and sale transactions, in new construction as well as the existing home marketplaces. This frequency will increase dramatically over the next decade, based upon trends and surveys conducted with real estate agents and homeowners, as well as significant investments by the public sector.
Studies have consistently found that homes with high-performing features or attributes can sell for more than comparable homes without them. Freddie Mac found that homes can sell for 2.7% - 5% more, corroborating similar studies such as one that found an average 5.15% price premium for Pearl-certified homes. These numbers are averages, however. When an appraiser looks at a home, he or she isn’t thinking about national averages, but about how that home’s physical and economic characteristics will be valued by the local market.