How Much Are Buyers Willing To Pay For Energy Efficiency?

On average, home buyers are willing to pay an additional $8,728 upfront on a home in order to save $1,000 a year in utility bills, according to NAHB’s recently released study, What Home Buyers Really Want (2019 Edition) (Figure 1). The study is based on a survey asking recent and prospective home buyers (people who bought homes in the previous three years or are planning to do so in the next three years) about what they want in a home and community.

It is important to note that while the average amount a home buyer is willing to pay is $8,728, the median is $5,000. The difference can be explained by the presence of some very green-motivated home buyers who are willing to pay more than $50,000 upfront to save $1,000 a year. It may also be the case that these particular home buyers have the means to make a bigger upfront payment. In fact, the study shows that home buyers who expect to pay more than $500,000 for their homes will pay an average of $10,560 more to achieve those savings, about 60 percent more than the $6,653 those buying the most modest homes (less than $150,000) are willing to pay.

An equivalent way to present this information is in terms of the rate of return a buyer requires on the up-front investment.  If a buyer is willing to pay $5,000 up front to save $1,000 a year, this means the buyer requires an annual return of 20 percent.

Brought to you by NAHB Eye On Housing

Article written by Carmel Ford on April 12, 2019