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Munich Personal RePEc Archive

Evidence of rational market valuations for home energy efficiency

Nevin, Rick and Watson, Gregory (1998): Evidence of rational market valuations for home energy efficiency. Published in: The Appraisal Journal , Vol. 4, No. 66 (October 1998): pp. 401-409.

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Abstract

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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