| Are Home Buyers Turning Green or Getting Energy Smart? |
| Written by Jonathan Smoke | |
| 04.10.2008 | |
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Discuss this article on the forums. (0 posts) Yesterday I began a series of posts on our analysis of the NAHB 2007-2008 Consumer Preference Study. We did find that energy efficiency and better insulation were top influencers right behind living space. However, the survey data on energy and environmental issues reflect more of a practical awareness of the importance of conserving energy rather than an all out shift towards being Green at the expense of other desires and priorities. While environmental consciousness is clear, since close to 87% of respondents were concerned about the impact of their home on the environment, few were willing to invest in that concern. Only 16% of consumers responded they would be willing to pay more for an environmentally friendly home. A different question created some puzzling observations. When asked how much they would be willing to spend to save $1,000 a year in energy costs, the average response was almost $9,000. At the release of the survey’s findings at the Builder Show, much was made of this relatively high number. That number raised questions for us as the response seemed to challenge the relatively low number of people who were willing to invest in spending more to be environmentally friendly. Put another way, the question was asking people how much they’d be willing to pay now in order to pay $1,000 less per year. Looking at the present value of such a stream of savings, a $1,000 per year saving is only worth just over $4,000 if you are planning to stay in a home over five years or $7,360 if looking at a 10-year tenure. Maybe people are factoring in a perceived added value to the home that they could recoup in a sale as future owners would also benefit. Or perhaps people are willing to spend that amount of money because they expect $1,000 of savings this year to be $1,500 next year, as energy costs are raising faster than other goods and especially the value of homes. When we dug further into the data we found that the answers were mostly clustered in the rational end of the spectrum, but the average was distorted by 7% being willing to spend $20,000 or more. And when you slice amount willing to spend by the “environmental concern” level, we found something very interesting. Those who weren’t concerned or said they would not pay extra would only pay for the savings in line with a present value calculation assuming tenure of 6-10 years. But for those willing to invest in being environmentally friendly, or being “green,” they would pay a premium regardless of the financial benefit to their pocket book. Builders need to be aware of who their buyers are. While energy efficiency is top of mind, there’s definitely a segment of consumers willing to spend a premium. Looking at our consumer groups, Feature and Location buyers as well as Elite and Active Adult Elite are more likely to spend a premium. As far as the items covered in the survey, the energy related items most sought after were energy star rated windows, ceiling fans, water temperature control, a high level of insulation, certified energy rated home, and certified energy related appliances. Builders should also note that some energy unfriendly design features, like two-story foyers and family rooms, are also falling out of favor as more consumers expressed that they didn’t want these designs than those who indicated they were essential. If you are interested in learning more about our consumer groups, we’ve published information on our consumer groups. You can purchase our Home Preferences by Consumer Group report to see how the preferences differed by consumer group. Purchase the Understanding the Demand for New Homes reports specific to local markets to get rich local profile information and market demand estimates. If your market isn’t covered in our special reports, contact us to get a custom report specific to your community area. 
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