High-Tech Impact On Home Values – Part 1: Energy Efficiency

This is the first in a series of special reports.

Depending on who you ask, opinions about high-tech home investments can vary greatly.

If a homeowner sinks money into green technology like a tankless water heater, when can he expect to realize a return on his investment and how does that align with resale plans? First, we consulted Research Economist Gay Cororaton at the National Association of REALTORS® to lay some groundwork.

“In 2013,” Cororaton said, “there were 7.1 million owner-occupied homes that had at least one home improvement project completed for energy efficiency purposes.” Out of 75.6 million owner-occupied units, this only accounted for a 9 percent share.

So, it’s not a big trend (yet), but we asked Melisa Camp, REALTOR®, GREEN with HomeSmart Elite Group in Phoenix if she thinks that number will grow.

“With more Millennials coming into the market and more ‘penalty box buyers’ (foreclosures or short sales) coming from renting situations,” said Camp, “I think they will be more aware of how energy costs contribute to the larger price of home ownership and these groups will want and expect homes to perform better.”

NAR’s Home Buyer and Seller Generational Trends Report 2015 indicates that Millennials (born between 1980 and 1995) represent 32% of home buyers. In the related story “Must-haves to sell to young homebuyers“, Bankrate.com reports that young buyers look for energy-efficient homes, but often update them after they close.

The question remains, is going green worth the investment? Realtor.com recently cited a University of Chicago study that concluded “returns to common residential energy efficiency investments are negative.”

“In areas where utility costs are higher,” Camp continued, “the value for EE improvements will also be higher. If a seller has made EE improvements they will want an appraiser with ‘Residential Green Home’ experience to quantify monthly savings and assign values compared to a home without.”

Millennials may want more energy-efficiency, but it depends on whether they can afford to buy a newer home or upgrade an older one…and then there’s the question of resale. For example, if operating costs for a standard natural gas tank costs $80 more per year than a NG tankless unit, but the latter costs $500 more, then it could take up to 6.25 years to recoup.

Camp added, “I recently did a webinar for the Green REsource Council about Cost vs. Value and the single improvement that will earn sellers more dollar-for-dollar is installing a new steel front door.” You can see how regional and national upgrade averages compare in this report from Remodeling Magazine.