When a Less Expensive House Costs More
Category: Green Building
Author: Scott Allred
Posted: Wednesday - November 5, 2014
When deciding to purchase a new car, the major considerations are fuel mileage, resale value, reliability, design, features and conveniences. As recent fuel prices reached $4.00 per gallon or more, people lined up to get the latest Hybrid and fuel efficient vehicles.
For most families, a home is the largest investment most make in a lifetime. Why then, do they not use the same criteria when buying as they do when purchasing a new car? In most cases, the homebuyer rarely asks how many “miles per gallon” a prospective home gets but, it can have a significant impact on the total costs of the home. Additionally, when you go to “trade-in” that home for a newer model, will there be more potential buyers for your fuel efficient home or the gas guzzling Hummer house next door?
Many homebuyers are more interested in the glitzy amenities such as granite countertops, high-end appliances, home theatres, and triple shower heads with body sprays. You can have all the nice amenities in an environmentally friendly and energy efficient home if you are willing to seek out builders that specialize in this field.
A high performance home featuring the latest energy efficient and “Green” benefits, like a hybrid or fuel efficient vehicle, will prove to be a solid investment and an investment which you will be able to enjoy each day. Additionally, a home certified to the NAHB Green Building Program standards will benefit the homebuyer with:
Lower utility bills
Healthier indoor air quality
Higher resale value
Reduced environmental impact
Green components range from relatively inexpensive things, such as cellulose insulation made from recycled paper, to extremely expensive ones, such as solar electrical systems. The costs green upgrades add to a new home’s price vary widely. However, a 3 percent to 15 percent premium is a good rule of thumb.
As I meet people to discuss Green Building, I am often confronted with the dilemma of the added costs of incorporating green features in a house verses the lower priced “house next door” that does not have the same features. Normally, the higher upfront cost of a high performance Green home is offset by the monthly savings on utility bills. In fact, most Green homes result in a net positive monthly cash flow. That is, when you calculate the portion of your mortgage payment that is going towards your green upgrades and compare that to the savings on your monthly utility bills, you are saving money from day one. For example, the following chart highlights the total cost of ownership when the mortgage and the utility costs are considered:
Operating Costs of the High Performance Home
Conventional High Performance
Sale Price $300,000 $320,000
Monthly Cash Flow
Mortgage $1,800 $1,925
Energy Bill $484 $253
Total Monthly Cost $2,284 $2,178
Monthly Savings - $106
2400 SF home Per Month Per Month
Heating & Cooling $349 $179
Water $135 $74
Monthly Operating $484 $253
Source: Sara Lamia – The Building Coach
So, even though the conventional home costs $20,000 less to purchase, it actually cost $106 more per month to operate. Imagine what you can do with the savings. If you are disciplined enough to invest the $106 monthly savings at a rate of 5% over the life of a 30 year mortgage, you would have a handy sum of $88,000 on the date the mortgage is paid in full!
There is also good reason to think that green upgrades will increase a home’s resale value. There is an obvious cultural shift in our country towards a desire for a greener way of life. In the coming years, the demand for greener homes will outpace the demand for regular homes and Green homes will increase in value more quickly than regular homes. A green home is the better bet from an investment point of view.
In conclusion, all homebuyers should demand to see the fuel efficiency rating of a home under consideration. The bulk of homebuyers still see more value in the visible, aesthetic features of a home, such as granite countertops, than they do in green amenities. But protecting the environment and lowering the cost of homeownership is a winning combination that will be hard for homebuyers to resist in the long run. A high performance home is a home that is just more enjoyable to own, for its benefits to your pocketbook, health, comfort, and the environment.
Scott Allred is the Chairman of the Triad Green Building Council and the owner of Precept Construction, LLC. He can be reached at email@example.com or 336-286-6811. For additional resources on green building, please visit www.preceptconstruction.com.