A recent Yahoo survey about the American consumer's evolving view of housing provides interesting and strong evidence of a definite market trend. According to the Yahoo survey, energy efficiency is a top hallmark of the "dream home" -- more consumers cited energy efficiency as a desirable attribute than any other feature. The Yahoo survey can be found here.
Now, in some ways, this cannot be a surprise. Energy expenses, and energy efficiency, have been growing as an important factor in all real estate sectors for years.
Look at office buildings. Anyone and everyone involved in commercial real estate knows energy efficiency has been a top priority. LEED and Energy Star labels are everywhere. Top-tier tenants looking to move include energy efficiency as a priority attribute for prospective space. Recent studies document the corrleation between greater energy efficiency and higher property values.
Look at multi-family buildings. A recent Living Cities report found here shows a similar trend -- investments in energy efficiency deliver value. Deutsche Bank reports it could incorporate efficiency into underwriting of multi-family projects.
In residential real estate, there has been unmistakable evidence of the same trend -- increasing homeowner attention to energy efficiency. KB Home, Lennar, and other top home builders advertise that their houses save money every month on utility bills. These firms have seen what messages work.
Unfortunately, many homeowners have been reminded of the importance of utility bills as a cost of homeownership by the many stories of homeowners unable to make mortage payments -- and losing their homes -- because of high utility bills.
Many mortgage lenders have learned about the role of utility bills at the loan modification table -- homeowners show-up after delinquency for help and are finally asked about their complete household budget, including utility bills. Why isn't a full budget, with expected utility bills, part of the mortgage loan application?
Still, the trend has been quieter in the residential sector. In most cities, home shoppers find very little information in home listings about energy expenses. Mortgage lenders discover whether a borrower can afford the utility bills after the loan has been sold to Fannie or Freddie or insured by FHA.
This new Yahoo survey is, I think, picking-up on the true signal. This is a real trend that will become increasingly visible. Kudos to Rusty Weston and the team at Yahoo for a good piece of work.