Before the market meltdown in late 2007 that led to last year's recession, many experts predicted the next big market would be green homes - those equipped with the technology and materials, which foster energy efficiency. The argument made sense: green technology was new and on the move, the housing market was at an all time high and homes with green technology had more money invested in them which led most to assume their value would also be greater. Additionally, with the ever-increasing cost of utilities, green homes appeared to be investments, which would keep paying for themselves.
This has proven not to be the case. The housing bubble burst almost three years ago was detrimental to home values across the board. Because of this, green homes suffered by not receiving the boost in value they deserve. What has proven true in the past few years is that money invested in a home does not always equal added value. This is because the demand many predicted would build for green homes simply does not exist. When there is little or no demand for a product - regardless of the actual money invested in it - the value does not increase.
Additionally, since appraisals are coming in lower than the cost of building a green home, adequate financing is hard to obtain. The amenities that make a home "green" are not cheap, either, including passive solar heat, solar hot water, radiant flooring, high-performance windows, and insulation. Because the value of green homes does not reflect the amount of money put into these properties, developers are reluctant to construct new homes with green technology. This in turn further diminishes the market for green products, leading to a cycle of shying away from this new market for which many held high aspirations.
The American Society of Appraisers argues little is added to the market by simply adding value to a home based on the cost it took to build it. The real question is resale price, and with home prices down across the board and many unwilling to pay more for new technology, prices for green homes are particularly low. As ASA spokesman Jim Amorin put it, "Appraisers don't make the market, they reflect it."
Appraising property has also grown more complicated over the past few years, as regulations have increased. Currently, loan originators cannot select appraisers, so those who may seek green homes cannot request an appraiser understand the value of green technology.
Additionally, the value of many green homes currently being appraised is affected by the high number of foreclosed homes on the market. Despite all of these challenges, there are some signs of hope emerging for green homes. In Seattle, new homes with green certification are selling for 8.5% more per square foot than non-green ones. They are also selling 22% faster, which is a noteworthy statistic in the recovering housing market.
As an alternative to designing completely green homes, some homeowners are choosing co-housing to both cut down on costs and help the environment. Co-housing refers to the sharing of many appliances or resources that typically a single home would have just for itself, i.e. a lawnmower. Though these homes do not include the green technology that is helping push the market along, they are environmentally conscious choices and may help create a market for homes with green technology, which is very much needed in the current economy and housing market.
