'Green' homes could find niche in down market
By JOHN F. WASIK Bloomberg News
Published June 26, 2007
Will "green" homes perk up the punch-drunk U.S. housing market?
When there are more than 4-million unsold houses, builders and sellers cut prices or add value. Green homes that offer energy efficiency and power production follow the value path.
Yet properties that produce their own power and save energy will never make economic sense until they pay for themselves and are marketed as ways to lower ownership expenses and to build equity in declining markets.
Even though it's a tiny part of the market, green homebuilding has risen 50 percent since 2004, according to the National Association of Home Builders.
More than 97,000 such homes have been built since the mid 1990s. The association says about 35,000 of them will be built this year out of a projected 1.5-million housing starts.
This niche will be significant if it grows at an annual rate of 5 to 10 percent by 2010, as the trade group predicts. New-home construction may not return to the 2006 level of more than 2-million units until 2011, it says.
But can building green be energy-conscious and affordable? The area around Sacramento, California's capital, may be the prime place to watch.
Premier Homes Properties Inc. of Roseville, Calif., based in an area where summer heat often exceeds 100 degrees, sells zero-energy homes equipped with solar panels, tankless water heaters and additional insulation.
While their homes cost $40,000 to $90,000 more than other houses in the area, the builder says Premier's properties offer utility bills that are 60 percent less than conventional homes.
If you are paying a premium for a green home, you will need to know the payback period for environmental features and how much it may enhance your resale value.
You can gain satisfaction from a green home knowing that energy doesn't appear to be falling in price. Green buildings save an estimated 30 to 50 percent on energy costs with an average payback period of 12 to 24 months, according to the U.S. Green Building Council.
Most builders, based on the small number of green homes being built, are ignoring pent-up demand for energy-saving houses.
While more than 85 percent of owners surveyed said they would buy one home over another to ensure energy efficiency, some 78 percent of recent buyers said builders didn't even mention such cost savings during the buying process, according to Shelton Group, a market-research firm.
The U.S. government has also missed the point on conserving energy, pouring billions into ethanol and other specious subsidies.
Some 30 percent of annual energy usage is consumed by buildings alone. As Congress prepares to craft legislation, it needs to provide greater incentives and mandates for homebuilders to incorporate energy-saving features.
There's no reason why solar appliances can't be standard equipment in new homes, the way dishwashers and microwaves are today. Green homes can pay for themselves. A sagging market provides a unique opportunity for that message.