Why Energy Efficiency Should Be Top Priority for Homebuyers and Sellers

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Recording Heat Loss at the House With Infrared Thermal Camera
Recording Heat Loss at the House With Infrared Thermal Camera

Consumer demand for more energy efficient homes is growing, but efficiency is often viewed as secondary to those items that are more visible, more tangible or are known to add value to a home. Three recent developments suggest this may be starting to change:

1. Mortgages Are Beginning to Value Energy Efficiency

In the fall of 2015, FHA announced that its borrowers can qualify for a “stretch ratio” of 2 percent if the home meets a six or higher on US Department of Energy’s (DOE) Home Energy Score. DOE put this in real world terms in an article published in January of 2016: “a homebuyer with an income of $75,000 who currently qualifies for a monthly mortgage payment of $1,938 per month can now borrow an extra $125 per month for a more energy efficient home. Financed with a 30-year mortgage at today’s rates, the homebuyer can now qualify for a house valued at approximately $26,500 more than a less efficient house.”

More efficient houses will be more affordable for a wider range of buyers. In April of this year, Fannie Mae announced the creation of a “HomeStyle Energy Mortgage” loan which provides up to 15 percent of the as-completed appraised value of the home to use for upgrades for energy efficiency. This is contingent on a borrower providing an Energy Report, such as DOE’s Home Energy Score, so this action is supported by the FHA decision. However, borrowers can finance up to $3,500 in weatherization or water upgrades without a report. These lending instruments will ultimately make capital available for energy upgrades that was not available before.

2. Ninety Percent of Homes are Under Insulated

Based on research recently conducted by the Boston University School of Public Health, NAIMA estimates that 90 percent of homes are under-insulated.[1] Insulation is one of the top ways to improve a home’s energy efficiency by reducing home heating and cooling costs[2]. Insulation has the added benefit of making a home more comfortable, reducing pollutants and improving indoor air quality.  People don’t see insulation, so they don’t think about it. They do see windows and doors, so they think about those items. The reality is that insulation has a three times greater impact on the average home’s energy and comfort than windows or doors do[3]. And making the needed improvements in home has proven to be a cost-effective way to boost energy efficiency and comfort.

3. Adding Fiber Glass Attic Insulation Provides the Highest ROI, According to New Research

Results of Remodeling Magazine’s 2016 Cost Versus Value report showed that adding fiber glass attic insulation, not a kitchen or bath remodel, provided the largest return on investment to homeowners, at 117 percent of the cost of the project. This was the only project that had an average national return of more than 100 percent. By comparison, the average cost and average return at resale for the 30 projects considered in the report was just 64.4 percent. While consumers may know that insulation improves a home’s energy efficiency and comfort, they may not know that it adds value to their homes. The report estimated the average cost of this upgrade at $1,268 nationwide, and calculated the average increase in value at $1,482.

Whether you’re buying or selling a home, you should learn more about how to maximize home energy efficiency. For more information about how insulation can improve your home, visit www.insulationinstitute.org.

[1] Under-insulated means when compared to the minimum prescriptive wall and ceiling insulation R-values found in the 2006 International Energy Conservation Code (IECC)
[2] Savings vary. Find out why in the seller’s fact sheet on R-values. Higher R-values mean greater insulating power.
[3] U.S. Department of Energy

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jordandoria

Mr. Doria is Vice President, Marketing and Communications for the North American Insulation Manufacturers Association. Prior to joining NAIMA, Mr. Doria spent four years as Manager of Stakeholder Engagement for Ingersoll Rand’s Center for Energy Efficiency and Sustainability, working to support public policy on issues related to building codes, energy efficiency and standards. He is also the former Government Relations Manager of the Air-Conditioning, Heating and Refrigeration Institute.

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