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March 20 News: Owning An Energy-Efficient Home Makes You Far Less Likely To Default On Your Mortgage

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"March 20 News: Owning An Energy-Efficient Home Makes You Far Less Likely To Default On Your Mortgage"

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Energy Efficient Home TacticsA new study finds that living in an energy-efficient home makes you one-third less likely to default on your mortgage. [E&E News (subs. required)]

Could double-pane windows lower your mortgage payments?

One day they might. Along with low-wattage lights, better insulation and smart appliances, living in an energy-efficient home makes you almost one-third less likely to default on your loan payments, according to a study released yesterday from the Institute for Market Transformation (IMT) and the University of North Carolina, Chapel Hill. If banks include this factor when deciding on prospects, a home that shrinks your energy bills could also cut your mortgage rate.

The report controlled for factors like the size of the home, its age, the borrower’s credit score, local unemployment rates, local climate and energy prices. Researchers paid special attention to loans that originated after 2006 and the types of loans disbursed to factor in the housing market collapse.

It turns out that Energy Star homes are 32 percent less likely to go into default. “We were expecting a number like 18 to 20 percent, to be honest,” Sahedi said. In fact, default risks go down as a home’s score on the Home Energy Rating System index goes up. Energy-efficient homes are also 25 percent less likely to prepay their loans, meaning lenders will make more money.

The new Chair of the House Science Committee’s subcommittee on the environment said: “I’m not as convinced as a lot of people are that man-made climate change is the threat they think it is.” [Salt Lake Tribune]

Climate groups are increasing pressure on the President to proceed with greenhouse-gas limits for new power plants, “as the utility industry seeks to weaken the standards before a deadline next month.” [Bloomberg]

A poll conducted in December found that 62 percent of Americans think the Earth is getting warmer, up from 55 percent last spring — and most base their opinions on the weather. [AP]

The Bureau of Labor Statistics said clean energy jobs grew from 2010 to 2011 at four times the rate of all other categories combined. [LA Times]

Ceres’ Mindy Lubber outlines the overwhelming support Renewable Portfolio Standards have in the states, and the mystifying opposition they inspire. [Forbes]

White House energy and climate advisor Heather Zichal said that “ANWR’s off the table” when asked if the Administration would trade drilling in the refuge in exchange for passage of the Energy Security Ttrust Fund. [Washington Post]

Los Angeles is accelerating the conversion of its reliance on coal by dumping its interest in an Arizona coal plant and converting one in Utah to natural gas. [LA Times]

Transocean CEO Steven Newman admitted in court that his crew should have done more to prevent the blowout that caused the Deepwater Horizon spill. [New York Times]

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15 Responses to March 20 News: Owning An Energy-Efficient Home Makes You Far Less Likely To Default On Your Mortgage

  1. fj says:

    When a building is designed to work very well to be extremely environmentally friendly, by definition (most likely) it is very energy efficient, cost-effect, resilient, and very easy to get working when things go wrong.

  2. Paul says:

    I’d argue that the kind of people who buy such homes tend to be more affluent in general.

    basically this article is putting the causation arrow in reverse.

    my home was built in 1890 in the UK. it took a rather substantial amount of money to add insulation and move to double glazing on most of the windows.

    This has saved me money in the long run but if i had less money those energy saving investments would never have occurred.

    • fj says:

      Furnace-free homes have been built for many years and cost about the same.

      Basic passive solar is very cost-effective.

      Building with structural insulated panels (SIPs) saves a considerable amount in labor costs and minimal to no materials cost difference.

      • Paul says:

        Housing market in the UK is absolutely bonkers just an info point to consider. A house is upwards of 20-25 years wages.

        Energy efficient homes are actually priced a lot more expensively on the market than equivalent homes which aren’t.

        Brand new homes in general are only bought by the middle class any way. Affluence is the reason these home owners aren’t defaulting not the fact that the energy efficient house saves money.

        its exactly the same with the poor tending to be more obese than those in the middle class, healthier food is more expensive.

        • fj says:

          Agreed.

          Devil’s in the details.

          Successful communities will game the system and make this stuff work; ie, until the system makes it easy.

        • Joan Savage says:

          Paul,

          You seem unconvinced by the statement in the article, “The report controlled for factors like the size of the home, its age, the borrower’s credit score, local unemployment rates, local climate and energy prices.”

          There may be unaccounted-for factors that affect why mortgaged Energy Star homes are far less likely to go into default, but if we have to speculate on what those factors are, let’s give the researchers some credit for looking at the variables for which they had access to data.

          A factor that seems obvious to me is that Energy Star homes cost less to operate, so the utility bills could be less stress on a household budget.

          If household budget were studied directly that might statistically clean out some of the compounded factors in credit scores.

      • Sasparilla says:

        I think what Paul says is valid, at least here in the U.S..

        The folks that have really energy efficient homes in the U.S. (not standard track housing that is 90% of the market) by far are often higher end homes and/or custom built (which tend to be more expensive) to get that efficiency – this also means far fewer first time buyers (who default the most) which means far less defaults.

        It’d be nice if all we had to do was make our houses really energy efficient to radically reduce default’s but that doesn’t pass the common sense smell test.

        • Joan Savage says:

          It would be great if the researchers ran stats on whether or not the mortgage-holders were first-time home buyers, as would my other info-wish about how much reduced home energy cost affected the household budgets, another obvious factor in mortgage-default rates.

          However, it looks like the research had no primary interview data with the homeowners, relying more on the banks’information that would have included applicant credit scores.

    • fj says:

      Paul,

      Joan Savage has it right that the people analysing the data have it right unless you give specific reason that there is something wrong with the data and analysis.

      If you have read the original report where do you think the stats or analysis are in error; or do you know E&E News or the primary source to produce bad reports?

      You say: “people who buy such homes tend to be more affluent in general”

      And, describe a single case study of you retrofittin your home which you also indicate requires a certain level of affluence.

      What exactly does that mean?

      It could mean any number of things such as better educated, more disposable income, including that people who are more affluent tend to make better decisions; not to say that any of these things are necessarily true; and the people doing the reports did not sufficiently correct for this.

    • Mulga Mumblebrain says:

      That was my first thought, too. The poor default more often, and cannot afford improvements to old homes or their installation in new. Indeed, in Australia at least, most modern homes are embarrassingly energy inefficient, lacking not just verandahs (as most old homes do) but even eaves, in the interests of packing them in ever more tightly together. Lots of glass, often facing west or north, no sheltering trees or room for them, and huge air-conditioning systems. My old place is small, built of stone, has verandahs and the thoughtful occupants a hundred or more years ago, planted an oak that is now gigantic, and cuts out a lot of summer sun.

  3. We are seeing the beginnings of an awakening and it comes from the property and liability insurance companies. http://articles.philly.com/2013-03-14/news/37685436_1_buffer-zones-panel-discussion-hazard-mitigation

    Now, we need those life insurance companies who sell annuities to understand that they need to price climate risk into their actuarial calculations.

  4. Mulga Mumblebrain says:

    The ‘ANWR’s off the table’ only until Keystone is done and dusted, them, I’d bet a penny to a pound, it will mysteriously find itself right back on that old table. On the chopping block, on the table, in fact.

  5. Paul Magnus says:

    Get out and shout….

    Massive Keystone XL Protest Awaits Obama At Fundraiser
    http://www.huffingtonpost.com
    WASHINGTON — President Barack Obama will be met on a fundraising trip to San Francisco next month by hundreds of activists urging him to reject a permit for the Keystone XL, the controversial oil pipeline that’s taken center stage in the fight to curb greenhouse gas emissions. Progressive group CRE…

  6. MarkfromLexington says:

    Here is a link to the actual report. No subscription required. “Home Energy Efficiency and Mortgage Risks”

    http://www.imt.org/uploads/resources/files/IMT_UNC_HomeEEMortgageRisksfinal.pdf

    This is the link to the webpage summarizing the report. http://www.imt.org/resources/detail/home-energy-efficiency-and-mortgage-risks