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Latest Green Buyer Trends for Real Estate Investors

Jim Simcoe
3 min read

A 2010 study just published by AvidBuilder.com (a leading research and management company serving the home building community) had some surprising insights into the desires of potential home buyers.  The study was based on a survey of 11,335 home-owners that built houses in the last 9 years.

The group was segmented into six buyer types including:

1. First-time buyers- young families, single/couple buyers with no kids.
2. Move-up- growing families, etc. seeking larger/better home.
3. Displaced- Relocations or families seeking smaller home due to change in family situation.
4. Empty Nester- Semi-retirees/retirees.
5. Second Home- Professionals seeking vacation home.
6. Custom- Families/professionals seeking custom home.

The respondents were asked questions like “How important is having high-efficiency insulation?” and had to choose from the following answers:
– Must have
– Really want
– Might be nice if affordable
– Might be nice if included

Here are some of the results:

– 60% of respondents said that ‘Green Features’ were a must have as compared to 38% who said home design was a must have.  Only 9% said that ‘Home Fixtures’ were a must have.  This is an amazing trend from just a few years ago when green features were barely a consideration for any buyer.

– 57.7% of first-time buyers said that overall energy efficiency is a must have.  62.5% of Empty Nesters also said it was a must have.  While 74.2% of Custom owners said it was a must have, that’s not as impactful  because if you have the money to build a custom home, spending to make it energy-efficient is not as big of a factor.  What’s interesting is that first-time buyers (usually stretched for cash) and retirees (usually on fixed incomes) understand the budgetary impact of living in an energy-efficient home and seek those homes out. What’s also interesting is that while roughly 50% of the market for rehabs (first-time buyers, retirees) want these features, less than 5% of the RE market provides them.

– In all six buyer categories, high-efficiency insulation garnered more must have votes than any other answer.  In fact, only .6% of one buyer type (Move Up) ranked it as not important.  All six types of buyers ranked it as a must have by a large margin.

– Framing 2 x6, tankless water heaters, recycled materials and green flooring largely fell into the ‘really want’ or ‘might be nice’ categories.  I believe that they are not seen as essentials because they are new technologies and the benefits to the homeowners aren’t as clear.  As the general public becomes more informed these results will increase.

– High window efficiency trended up as a must have while large windows trended down.  Respondents showed that they were willing to go smaller in window size to improve performance. This represnets a sea change as most buyers have always wanted large windows.

My immediate take-aways from this study:

1. Performance is King. People are much more interested in a homes performance than the fixtures inside it.  Current economic conditions, etc. have lead us all to be cost-conscious and consider performance as the true litmus test.  Hmmm, where have I read that before?

2. Buyers are more educated than we expected.  They know about and see the value in a variety of green building practices.

3. The demand for green homes (new, rehabbed, etc.) continues to outpace the supply.

4. The window is open but starting to close for real estate investors.  The time to capitalize on #3 is now.  You have buyers who want these features, you have contractors who are starting to understand how to implement them and you have people like me to help you.  However, this window is starting to close.  As more studies of this nature come out, more RE investors are beginning to pursue this path.  Soon, you won’t be the only game in town on this.  [Case in point, 18 months ago, I had 1 green real estate investor client. I couldn’t get anyone to even talk about the benefits of green RE investing.  Now I have people from all over the country calling and I am working on projects all over the US.]

Thanks, as always, I appreciate your comments/questions…Jim

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.