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Evidence of rational market valuations for home energy efficiency

  • Nevin, Rick
  • Watson, Gregory

According to this study, residential real estate markets assign to energy-efficient homes an incremental value that reflects the discounted value of annual fuel savings. The capitalization rate used by homeowners was expected to be 4%-10%, reflecting the range of after-tax mortgage interest rates during the 1990s and resulting in an incremental home value of $10 to around $25 for every $1 reduction in annual fuel bills. Regression analysis of American Housing Survey data confirms this hypothesis for national and metropolitan area samples, attached and detached housing, and detached housing subsamples using a specific fuel type as the main heating fuel.

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File URL: http://mpra.ub.uni-muenchen.de/35343/1/MPRA_paper_35343.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35343.

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Date of creation: Oct 1998
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Publication status: Published in The Appraisal Journal 66.4(1998): pp. 401-409
Handle: RePEc:pra:mprapa:35343
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  1. Longstreth, Molly, 1986. "Impact of consumers' personal characteristics on hedonic prices of energy-conserving durables," Energy, Elsevier, vol. 11(9), pages 893-905.
  2. Laquatra, Joseph, 1986. "Housing market capitalization of thermal integrity," Energy Economics, Elsevier, vol. 8(3), pages 134-138, July.
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