Energy Efficiency in the Housing Market

NAR ResearchArun Barman

Overview

• Putting residential energy consumption in perspective

• Review of home buyers preferences in terms of energy efficiency

• Differences in energy usage– Age and size of homes– Regional variation

• Factors affecting implementation of upgrades– Home values and expected tenure– Payback period– Government tax incentives

Residential Energy Consumption in Perspective

Residen-tial 22%

Commercial 19%

Industrial30%

Transportation29%

Source: Energy Information Administration / Annual Energy Review 2009

Home Buyer Preferences

Source: NAR 2010 Profile of Home Buyers and Sellers

Heating and cooling costs

Energy efficient appliances

Energy efficient lighting

Landscaping for energy conservation

Environmentally friendly community features

0% 20% 40% 60% 80% 100%

39

24%

24%

10%

10%

49

47%

45%

39%

41%

12

29%

31%

51%

49%

Importance of Home's Environmentally Friendly Features

Very Important Somewhat Important Not Important

Energy efficiency per square foot better for newer homes, but homes are getting bigger

Source: 2005 Residential Energy Consumption Survey

Before 1940

1940 to 1940

1950 to 1959

1960 to 1969

1970 to 1979

1980 to 1989

1990 to 1999

2000 to 2005

1,500

1,700

1,900

2,100

2,300

2,500

2,700

2,900

$0.50

$0.55

$0.60

$0.65

$0.70

$0.75

$0.80

$0.85

$0.90

$0.95

Size of Home vs. Energy Cost Per Sq. Ft

Square Feet per Home Energy Expenditures per sq ft

Av

era

ge

Siz

e o

f H

om

e in

Sq

ua

re F

ee

t

Ye

arl

y E

ne

rgy

Co

st

Pe

r S

qu

are

Fo

ot

Regional Variations in Energy Consumption

New E

ngla

nd

Mid

dle

Atlant

ic

East N

orth

Cen

tral

Wes

t Nor

th C

entra

l

South

Atla

ntic

East S

outh

Cen

tral

Wes

t Sou

th C

entra

l

Mou

ntai

n

Pacific

0

20

40

60

80

100

120

140

All End Uses

Mill

ion

s B

tu o

f c

on

su

mp

tio

n p

er

ho

us

eh

old

Source: 2005 Residential Energy Consumption Survey

Share of annual energy expenditures spent on heating and air-conditioning by region

Space Heating (Major Fuels) Air-Conditioning0

5

10

15

20

25

30

35

40

4541%

7%

37%

8%

19%23%

21%

14%

Northeast Midwest South West

Per

cen

tag

e

Source: 2005 Residential Energy Consumption Survey

Annual Energy Costs Per Year

Source: 2005 Residential Energy Consumption Survey

Annual Energy Spending: Top Four States

Source: 2005 Residential Energy Consumption Survey

All End Uses Space Heating (Major Fuels)

Air-Conditioning$0

$500

$1,000

$1,500

$2,000

$2,500 $2,409

$995

$197

$2,051

$213

$636

$1,806

$609

$216

$1,681

$87

$597

$1,396

$208 $177

Four Most Populous States

New York Texas All Other StatesFlorida California

Does it make sense to retrofit homes?

• According to the Profile of Home Buyers and Sellers (2010), the median tenure of sellers was 8 years.

• The decision to upgrade has several components– Piece of mind (satisfaction people have from being

environmentally friendly)– Savings while occupying the home (if the payback

period for the upgrade is less than the anticipated tenure in the home)

– Resale value (some upgrades may have a higher resale premium than others, though more research is needed in this area)

Payback period

Added cost of upgrade = Payback period in years

Estimated savings per year

Sample payback periods Northeast

Added Cost Savings ($/yr) Payback in yearsNortheastProgrammable Thermostat $115 $183 0.6Heating System Tune-up  $96 $122 0.8Seal Duct Leaks $443 $311 1.4Windows and Skylights  $744 $341 2.2Insulate Ceilings $643 $268 2.4Insulate Ducts $443 $183 2.4Insulate Walls  $731 $305 2.4Seal Air Leaks  $554 $213 2.6Water Heater Replacement  $132 $37 3.6Furnace Replacement $1,145 $293 3.9

Source: Energy Efficient Rehab Advisor

Compare that to the West region

Added Cost Savings ($/yr) Payback in yearsWestHeating and Cooling System Tune-up $96 $125 0.8Programmable Thermostat $115 $109 1.1Electric Heat Pump $773 $152 5.1Seal Duct Leaks  $443 $67 6.6Seal Air Leaks $554 $59 9.5Windows and Skylights $1,546 $126 12.3Insulate Ceilings $975 $50 19.4

Source: Energy Efficient Rehab Advisor

Sample Payback periods for retrofits

Northea

st

Centra

l

North C

entra

l

Southwes

t

Southea

st

Wes

t0

1

2

3

4

5

6

7

8

9

10

0.6 0.6 0.6 0.5 0.8 0.8

2.6

1.3

2.4 2.3

8.4

9.5

Programmable Thermostat Seal Air Leaks

Pa

yb

ac

k in

ye

ars

Source: Energy Efficient Rehab Advisor

Choice of “green” retrofits are not only made by consumers

• Geography and age of home matter• Government incentives

– Government rebates and tax credits for certain types of upgrades

• “Cash for appliances”

– Energy Star program

• Feasibility of projects– DIY Projects vs. Larger Projects (i.e. programmable

thermostat vs. window replacement)– Contractors who do green remodeling may or may

not be available at reasonable cost in your market area

Links and Contact Information

• For more information:– NAR Research (

http://www.realtor.org/research)• My email: abarman@realtors.org

– Department of Energy (http://www.eia.doe.gov/)

– American Housing Survey (http://www.census.gov/hhes/www/housing/ahs/ahs.html)

– Energy Efficient Rehab Advisor (http://www.rehabadvisor.pathnet.org/)