Evidence of rational market valuations for home energy efficiency

Rick Nevin () and Gregory Watson

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Energy; Housing (search for similar items in EconPapers)
JEL-codes: Q43 (search for similar items in EconPapers)
Date: 1998-10
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Citations: View citations in EconPapers (25)

Published in The Appraisal Journal 66.4(1998): pp. 401-409

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:35343

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