“Increasing the supply of homes for sale would certainly help bring balance to this strong seller’s market, but unfortunately the most recent data doesn’t suggest that inventory is likely to improve in the near future.” Fannie Mae SVP
It’s Not Passe To Be Green
To say that it has been a very strange year and a half in real estate is a huge understatement. Like everything else, buying, selling, building, and financing homes has been affected by the pandemic and, at this point, there is no way of knowing how many of these changes will be transitory and how many will last for decades.
Homebuyers have demanded, and builders have rushed to accommodate homes in less densely populated areas, with flexible living and work spaces, and increased outdoor living options. Employment trends indicate some of these changes will endure. For example, a recent study of large corporations found the majority expect that, in the future, their employees will spend an average of two days working from home each week.
Lost or Only Mislaid?
We also wonder what aspects of homeownership may have been lost in the quantum shifts that have occurred since the spring of 2020. Could one be a diminished focus on sustainable homes?
This concern arose out of a recent survey the National Association of Realtors (NAR) conducted among its members. Fifty-five percent of the agents surveyed said their clients were at least somewhat interested in sustainability. However, when asked about specific green features such as solar panels or green certification, agents did not feel they had a significant impact on marketing time, for better or worse, nor did they think prices were positively or negatively affected.
But it is fair to n more than a third of agents said their local Multiple Listing Service included “green” data fields in their listing format and only 22% of agents reported direct, involvement with a property that had green features, either on the buyer or seller side.
What agents saw as important to buyers were the age and condition of doors, windows, and siding (39%), proximity to frequently visited places (38%), a comfortable living space (37%), and a home’s utility bills and operating costs (23%). The last feature was the only remotely green aspect of a home that gathered more than a 9% positive response. Renewable energy features (solar, geothermal) were rated as a selling point by only 4%.
In the superheated real estate market that has been operating over the last two years, is the apparent lack of interest in green homes survey results) be sumer, the product, or the marketing? In other words, do homebuyers have little enthusiasm for green features, are there just too few homes available with or without such features for them to be too particular… or are those features, where they do exist, not being effectively highlighted by agents and their marketing materials?
Out of Sight or of Mind?
Maybe it is a bit of “all of the above,” but it might also be that the benefits of green living have fallen out of public consciousness as homebuyers have come to put a high value on outdoor space, homes that are suitable for multitasking, or located out of congested areas.
Back in the pre-pandemic era—and, given all we’ve lived through, that seems like ancient history—green seemed destined to be the way homes were built and the way people would live in them. Two separate studies in 2016, one by the U.S. Green Building Council (USGBC) and the other by the National Association of Home Builders (NAHB) found the demand for green homes was growing rapidly. The studies agreed that by 2020 close to 20% of new construction would be green and about three-quarters of American builders and remodelers would be involved in such projects.
Taking the “LEED”
USGBC is a pioneer in green construction. It developed the LEED (Leadership in Energy and Environmental Design) standards, starting out in the office and industrial sectors, certifying new construction and retrofits that met its criteria. The program long ago branched out into the residential sector and by 2019 had certified a half million single-family homes and a total of 1.6 million residential units world-wide, a 19% increase in only two years. Almost 40,000 of the single-family homes were in California.
A LEED certified home costs 1% to 6% more than noncertified homes but USGBC has said that homebuyers seem to view the extra cost as a worthwhile investment for a healthier, more environmentally friendly home. Not to mention that the increased investment was virtually guaranteed to pay for itself.
LEED’s website says the average monthly electric bill in the U.S. is $117 with heating and cooling accounting for about 32% of it. LEED homes use 20-30% less energy and water, with some owners reporting up to 60% in energy savings.
It was argued that, since green homes were becoming the wave of the future, they would be easier to sell. In fact, it was speculated that homebuyers who bought a traditional home, would soon begin to factor in the cost of green retro fitting as they prepared their offer. Studies found Californians, in a state with more green homes than any other, were willing to pay an average of $17,000 extra for an environmentally friendly home.
While LEED certification is the gold standard, only a fraction of green homes carry its certification or the lower designation, LEED Registration. Still, their guidelines are good markers. The most important is energy efficiency which LEED calls “the key to making a building a finely tuned, lean, green machine,” one that takes maximum advantage of the sun and wind to heat, light, and cool the building affordably.
A green home also makes efficient use of water, employs green and sustainable materials in its construction, and reduces waste by utilizing recycled and recyclable building products. LEED says with the right set-up, builders can reduce waste by 70% and the eventual owners can almost eliminate it from their lives.
“Although the recent drop in softwood lumber prices since mid-May is helping bring costs down (after having driven them up drastically earlier in the year), the decline has been offset by large increases in the prices of several other building material products.
The prices of these 10 have increased the most thus far in 2021, and all are up at least 30%: Steel mill products, building paper and building board mill products, asphalt, plastic water pipe, fertilizer materials, laminated veneer lumber, thermoplastic resins and plastics materials, structural metal joists and concrete reinforcing bars, wood window and door frames, copper pipe and tube.
Over the first seven months of 2021, the majority of these products’ prices have increased many times more than they did in 2020. The price change of steel mill products is the most glaring example, up 81.3% year to date following a 2020 increase of 11.1%.” National Association of Home Builders
Clearing the Air
Another benchmark of a green home is the indoor air quality. According to the Environmental Protection Agency (EPA), concentrations of some pollutants are two to five times higher indoors than outdoors. Some of this indoor pollution comes from products used both to build and to live in the homes. Some construction materials off-gas fumes from finishes and glues for months after they are installed as do some carpets, upholstery fabrics, and furniture. Fumes from cleaning products, fireplaces, air fresheners, and tobacco products all lead to less than healthy homes. All this is made worse by older HVAC systems which neither allow adequate air exchange between indoors and out nor filter the air efficiently.
If we have allowed green to become passe, then we are being short sighted. It seems that the pandemic may have lowered the attention paid to green, but not the need for it. Indeed, we found the experts transitioning from talking about green buildings to focusing on having healthy ones.
This is the approach USGBC has taken in adding new guidance to its certification standards. It did so, it says because “Building new green affordable housing or retrofitting existing buildings to green standards makes more sense than ever— to address unmet housing needs, to create housing that is more resilient against health and climate threats, to create jobs and to generate economic activity.”
Necessity Not Luxury
Kimberly Vermeer and Walker Wells, co-authors of Blueprint for Greening Affordable Housing wrote recently in ShelterForce.org that it may seem like green is an unaffordable luxury at a time when the focus is understandably on the health of residents. But by making buildings healthy and sustainable, we can help build resilience to the current pandemic and to future health and climate threats.
While their emphasis is primarily on building affordable and sustainable multi-family projects, their message applies to homes of all types. First, they say the healthy housing elements of green building provide defenses against respiratory illnesses and airborne vectors. The fresh-air ventilation and filtration requirements can reduce exposure to viruses and reducing indoor pollution also reduces triggers for respiratory illnesses like asthma, a complicating condition for air borne viruses.
GETTING MORE BANG FOR YOUR BUCK
Zonda Media, has released its 34th annual Cost versus Value Report on remodeling. The report measures the home remodeling projects that provide the greatest return on investment (ROI) for homeowners. Exterior projects topped the list this year, and not particularly sexy ones. The top project was a garage door replacement with an average cost of $3,907 and value at sale of $3,663, a 94% ROI. Manufactured stone veneer installation came in second, with a 92% return.
The majority of the top ten projects deal with siding. Only a minor kitchen remodel in third place offered much glamour. REMODEL magazine.
Angelo Tan, Green Building Country Lead of the Int’l Finance Corp., says the pandemic has also provided non-health reasons for green buildings, which he says provide a better work-from-home environment. “They are energy and water-efficient, lowering our home utility bills, which have ballooned since we vacated our office spaces. And, because they use fewer construction materials, they reduce resource extraction, preventing wildlife habitat destruction and biodiversity loss, from which the pandemic is [said] to have originated.”
Churchill once famously said, “Never let a good crisis go to waste.” Perhaps when we return to normal, we will find the pandemic has provided new pathways and incentives for reimagining the built environment.
On a Related Subject
As noted above, going green will ultimately save most homeowners (and renters) money. While those eventual savings may be tempting, the costs of buying an energy efficient home or retrofitting into one may be out of reach. Lenders, however, do recognize these cost saving aspect: loan products that out of the upfront costs.
ADAPTING FOR ZOOM
With an unprecedented 42% of the workforce in the US spending at least some time working from home in the last year, the home office has taken on new importance. Home design experts who were asked how homeowners are adapting their spaces for remote working said guest rooms are the most common spaces converted into home offices, while dining rooms and bedrooms are the most popular for use as a combined working space. A bookshelf is the top choice for a video conference background followed by artwork. They also note that stand-up desks are growing in popularity. Christina Miguelez, FIX
According to MoneyGeek, there are two types of “green” loans. An energy – efficient mortgage (EEM) is generally rolled into a primary mortgage with a single payment. These not only provide the funds for improvements but take future energy savings in mind when qualifying the buyer. Thus the buyer may only need to qualify for the purchase price, not the costs of improvement. This may mean a larger down payment. These mortgages may also be available for purchasing an already energy – efficient home.
The second type, an energy-improvement mortgage (EIM), will finance green improvements to an existing home. The lender can increase the loan amount of an existing mortgage to cover the costs of a retrofit, paying the borrower from an escrow account as improvements are made. This will increase the monthly mortgage payment, but the theory is that money will come through lower energy bills.
All four of the major guarantors, Fannie Mae, Freddie Mac, FHA, and the VA, offer “green” mortgages. FHA, in fact, has done so since 1995. The improvements can include energy-saving equipment, and active and passive solar and wind technologies. The energy package can include materials, labor, inspections, and the home energy assessment by a qualified energy assessor.
Check With Us
If you are considering going green, feel free to contact us for more information on where to get started.
And here’s hoping that one good thing that will remain after the pandemic is a renewed appreciation for a healthy and comfortable home.