Environmentally friendly housing features have been hawked as a value add for builders and sellers. Buyers simply do not agree. So far, the green movement in housing has been a bust.
Irvine Home Address … 20 JULIAN 1 Irvine, CA 92602
Resale Home Price …… $639,000
"Break the bough and strip all of it.
Fell this forest, make a profit!"
"Are there more so brave and honest;
Who would die to save my forest?"
Skyclad — The Disenchanted Forest
Builders hate green building
I am going to let you in on a little secret: homebuilders hate the new trend toward Green Building. A homebuilder's motivations are pretty basic. They will provide anything a buyer is willing to pay for. If buyers want granite countertops, and if buyers are willing to pay the builder more than what it costs, then the builder will provide plenty of granite countertops.
Builders do not like to be forced to provide those items that buyers are not willing to pay for. Have you noticed that builders don't provide back yard landscaping? That is no accident. Study after study has shown that landscaping adds about $0.50 for every dollar spent. When a builder puts in back yard landscaping, they lose money, so they don't do it. The same is true of solar panels, low-flow toilets, and a number of other environmentally friendly items. Buyers give lip service to wanting these items, but they won't put enough dollars to green products to make it worthwhile for the builder to provide them.
Builders are being forced to put in Green Building features by local municipalities, but they resist this strongly because buyers won't pay for it. These environmentally friendly features become a cost to the builder with no increase in revenue. Like any wise business people, builders resist throwing away money.
The Green Building movement has a long way to go.
By Ernest Beck Sep 16th 2010
A well-appointed green home outfitted with energy-saving appliances and other eco-friendly features might save money on utility bills and ease your conscience, but it won't always help close a sale in a tough real estate market, a California homeowner has learned.
The warning sign for the green residential market: A house for sale in Costa Mesa that was the first in Orange County to receive a coveted LEED Platinum certification (green building's Good Housekeeping Seal) had its price slashed by half a million.
The seven-bedroom, 4,900-square foot Craftsman-style house is the ultimate green showcase, boasting everything from low-flow faucets to solar panels (see "Home Energy Saving Projects for Every Budget"). But even those hallmarks of sustainable design were no match, it seems, for the crappy economy and skittish buyers. According to the Orange County Register, the green home's list price recently dropped from $299,000 to $2,499,999.
The hefty drop underscores the continuing debate about the resale value of green homes. Many have believed that green would command a premium among buyers who aspire to a sustainable lifestyle, but now it appears that green might not be as big a selling point in a market that has gone off the rails.
The only people who ever believed green homes would command a premium are those vendors pushing green products and a few tree huggers. If there was real demand for these products, homebuilders would provide them in limitless quantities. There is no demand, so builders stay away.
So how green do prospective buyers want to go?
There's not much hard evidence to go by. Anecdotes suggest that sustainable homes can sometimes sell faster than conventional ones, especially if energy-efficiency is the main marketing theme, according to the National Association of Home Builders. On the other hand, some green condo buildings in urban markets like New York, that were expected to fly off the market in the boom, have had a rough ride.
Green or not, buyers are still constrained by the market's current tight financial conditions, the NAHB says, and even the prospect of lower monthly energy bills "has not gained the attention of the lending community."
Lenders don't really care how much a homeowner spends on utilities. Perhaps they should, but the DTI parameters don't include utility costs, and until they do, green products that tout energy savings will not get any financing dollars put toward them.
One problem is that most people are in the dark about what green building really means, and more importantly, if it's worth paying for. Green can also be confusing: Quick, what's the difference between LED and LEED? (Answer: LED is energy-efficient light emitting diodes, used in lighting and LEED is Leadership in Energy and Environmental Design, the much touted green certification program that includes a checklist of environmental standards).
Although the price gap between green and standard housing is reportedly closing, buyers aren't always interested in the technical aspects of how and why green will improve their lives, especially if they are agonizing over a big financial commitment. The Costa Mesa home, for example, which sits on a golf course, features dual-flush toilets, an internal gray water system, and drought-tolerant native plants in the garden (see "Landscaping With Low-Maintenance Lawns Saves Money").
Sounds great, but most buyers are more likely to wonder whether they can afford the mortgage.
The cold truth is that buyers don't care about green features. They care about costs, and green features add costs that are never recovered through use or added value.
August 23rd, 2010 — Marilyn Kalfus
A Costa Mesa residence that became the first single family home in Orange County to snag the nation’s highest rating under the LEED green building program has had a nearly $500,000 price chop.
The 7-bedroom, modern Craftsman-style house at 1811 Gisler Ave. is now listed at $2,499,999, down from $2,999,000 in January.
The home, priced at $510 a square foot, sits on 0.32 of an acre at the 11th green of the Mesa Verde Golf Course.
As Register reporter Pat Brennan wrote in February, the developer began planning to build the 4,900-square foot house from scratch 2 years before it hit the market.
“It’s loaded with features — solar panels, a gray-water system, natural lighting, low-flow water fixtures, landscaping with drought-tolerant native plants …”
All these elements helped Steve Blanchard earn the platinum rating from LEED — “Leadership in Energy and Environmental Design”:
- Solar power
- Internal gray water system, recycling sink and shower water for toilet flushes and outside irrigation
- Low-flow, dual-flush toilets and faucets
- An interior built with materials free from volatile organic compounds, a common pollutant
- LED lighting throughout
- Energy Star appliances
- Natural lighting throughout the house
- Tankless water-heating system
- High-efficiency heating and cooling units
- Gas-burning fireplaces
- Low-flow drip irrigation
- Landscaping with Orange County native plants, which won’t require any irrigation once established.
Other features include folding walls of glass that lead to a private courtyard, a formal dining room, 3 fireplaces, including in the master bedroom suite, a gourmet kitchen and an outdoor Dacor kitchen.
Another Ponzi implosion
- Today's featured property was purchased for $362,000 on 6/20/2002. The owner used a $289,500 first mortgage, a $72,150 second mortgage, and a $350 down payment.
- On 1/23/2003, he refinanced with a $365,000 first mortgage.
- On 4/3/2003 he obtained a $50,000 HELOC.
- On 8/6/2003 he refinanced with a $369,500 first mortgage.
- On 5/16/2006 he got a HELOC for $250,000.
- On 12/22/2006 he was approved for a $315,200 HELOC.
- Total property debt was $684,700.
- Total mortgage equity withdrawal was $322,350.
Recording Date: 05/13/2009
Document Type: Notice of Sale
Recording Date: 02/10/2009
Document Type: Notice of Default
Palladio Properties picked this up at auction for $536,500. They will net 8% to 12% for their investors.
Irvine Home Address … 20 JULIAN 1 Irvine, CA 92602
Resale Home Price … $639,000
Home Purchase Price … $536,500
Home Purchase Date …. 6/1/2010
Net Gain (Loss) ………. $64,160
Percent Change ………. 12.0%
Annual Appreciation … 53.6%
Cost of Ownership
$639,000 ………. Asking Price
$127,800 ………. 20% Down Conventional
4.52% …………… Mortgage Interest Rate
$511,200 ………. 30-Year Mortgage
$125,177 ………. Income Requirement
$2,596 ………. Monthly Mortgage Payment
$554 ………. Property Tax
$217 ………. Special Taxes and Levies (Mello Roos)
$53 ………. Homeowners Insurance
$128 ………. Homeowners Association Fees
$3,548 ………. Monthly Cash Outlays
-$434 ………. Tax Savings (% of Interest and Property Tax)
-$671 ………. Equity Hidden in Payment
$214 ………. Lost Income to Down Payment (net of taxes)
$80 ………. Maintenance and Replacement Reserves
$2,738 ………. Monthly Cost of Ownership
Cash Acquisition Demands
$6,390 ………. Furnishing and Move In @1%
$6,390 ………. Closing Costs @1%
$5,112 ………… Interest Points @1% of Loan
$127,800 ………. Down Payment
$145,692 ………. Total Cash Costs
$41,900 ………… Emergency Cash Reserves
$187,592 ………. Total Savings Needed
Baths: 2 full 1 part baths
Home size: 1,650 sq ft
($387 / sq ft)
Lot Size: n/a
Year Built: 2002
Days on Market: 21
Listing Updated: 40418
MLS Number: S630611
Property Type: Condominium, Residential
Beautiful Detached Home in Northpark Square Community. New Paint & Carpet. Stainless Steel Appliances. Open Floor Plan. Living Room with Fireplace. 3 Bedrooms upstairs. Spacious Master Bathroom with walk-in Closet. Close to Community Park. Move-in Ready.