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Recent studies support residential energy efficiency investments

A series of recent studies provides further evidence that home energy improvements are a smart investment by quantifying the value of residential energy efficiency. Taken together, these studies show that home buyers value residential energy efficiency improvements and are willing to pay for these improvements. Added to earlier findings that show homeowners make energy upgrade decisions based on increasing comfort, health, and safety, this latest crop of studies show that those same improvements might also make good financial sense. This is good news for recent participants in programs such as Illinois Home Performance with ENERGY STAR.

Last year, a California study looked at the sale of homes over several years in the late 2000s and determined that home buyers were willing to pay a nine percent premium on the purchase of a new home if it was accompanied by a third party green certification. As previously blogged by MEEA staffer Matthew Giudice, another 2012 study by the National Association of Home Builders (NAHB) found that new home buyers value energy efficiency over comparable homes, finding that 90% of respondents would be willing to pay two to three percent more for a home that included energy efficiency features and permanently lower utility bills.

What’s more, homeowners aren’t just waiting to purchase energy efficient homes; they are also willing to invest in doing the upgrades themselves. The Association of Energy Services Professionals (AESP), and International Communications Research (ICR) released a joint study this week based on a telephone survey of 1,000 U.S. homeowners. They found that 55 percent of US households have taken steps to increase the energy efficiency of their home, most commonly through CFL installations, high efficient appliances, high-efficient windows, increasing attic insulation, and the use of smart strips. The same study found that nearly 40 percent of respondents had participated in utility efficiency programs.

Lastly, a study out of the University of North Carolina at Chapel Hill for the Community Capital and the Institute for Market Transformation (IMT), released Monday, titled “Home Energy Efficiency and Mortgage Risks,” looked at 71,000 single-family, owner-occupied homes with mortgages originated during 2002-2012. The study states that homeowners that purchase ENERGY STAR new homes have a 32% lower risk of defaulting on their loans, controlling for other factors. Additionally, even among efficient homes, there was a statistically significant indirect relationship between efficiency and mortgage default risk.

These studies show that homeowners today are looking to invest in both energy efficient new and existing homes and that this smart decision makes them less risky borrowers. For more information on ways to improve your home visit www.illinoishomeperformance.org/