What Home Buyers Really Want: Ethnic Preferences (Part IV)

Previous posts highlighting findings from the study What Home Buyers Really Want: Ethnic Preferences have shown how housing preferences may – or may not – be affected by the racial background of the home buyer. One aspect of the home where race/ethnicity does not play a significant role is energy efficiency – a top priority across the board for all groups analyzed.

Data in the graph below show that buyers of all backgrounds will not really be moved to pay more money for a home simply to help the environment in some broad and vague sense: over 65 percent of all groups report wanting an “environment-friendly” home, but are not willing to pay more for it. Only small minorities of 15 percent or less would actually pay more just to be friendly to the environment.


However, when the question is phrased more specifically in terms of energy efficiency, and the impact that such features can have on utility bills, home buyers show they care a lot. When faced with a trade-off choice between having a highly energy efficient home with lower utility bills over the life of the home vs. one without those features that costs 2% to 3% less, over 80 percent of buyers of all backgrounds prefer the more expensive home that includes the energy saving features.


Further evidence of this strong desire for energy efficiency is found in the graph below.  Home buyers were asked how important a consideration it would be to have low utility costs when choosing their next home.  Strong majorities of White, African-American, Hispanic, and Asians buyers (over 80 percent) agree that low utility costs will be important to very important when making that decision.


Knowing that buyers are willing to pay for energy efficiency features so long as that translates into lower utility bills leads to the question of how much more are buyers willing to pay, beyond the original price of the home, in order to save say $1,000 a year in utility costs?  The answer is an average of $6,774 among White buyers, $7,578 among African-American buyers, $9,146 among Hispanic buyers, and $8,251 among Asian buyers.  The latter amounts suggest buyers expect fairly steep rates of return for the money they invest in energy efficiency – somewhere between 10.9 percent and 14.8 percent.


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