Will Falling Energy Prices Stunt the Fledgling "Green" Industry's Growth?

By
Real Estate Broker/Owner with Distinctly Texas Lifestyle Properties, LLC Office:682/498-3107 Tx Broker 0304050

Yea!!!!!  Gas prices are coming down.

Can you believe it?  Oil under $60/bbl!  However, for every yin, there's a yang.  The downside to lower energy prices is that alternative energy systems are becoming relatively more expensive as an option. Their payback on investment is being stretched out in time.  It takes a longer period of time to recoup such an investment.  And as a result, projects and equipement purchases are being reevaluated and/or postponed.

I think it is short-sighted to make these kinds of decisions based on short-term market conditions.  Historically, except for the Great Depression, prices have remained stable or increased in any 10 year period.  Same for real estate and stocks.  However, in a market driven economy, that's the price we pay.

When it comes to building "Green" homes, clients are sticking to their guns.  They are considering more than the immediate bottom line in their home choices.  They are including long-term ownership costs of operating and maintenance, safety, environmental impact and even marketability of the home for later resale. 

If you had a choice between two homes in todays market that were similar in features and one had obvious "green" features but at a higher price of $15-30K more, would you buy it?   Are you influenced by short-term financial concerns or long term overall performance return of the home?

 

 

For all your "Green" new home construction information, resources and expertise in Texas, go to www.preferredbuilders.org/home

 

Posted by

Mick Michaud,

Managing broker,

United Country Distinctly Texas Lifestyle Properties, LLC
Texas license # 0304050

The Lifestyle you want, the place to live it.

Comments (8)

Keisha Hosea- KASIHomes.com
KASI Homes - Chino Hills, CA
Real Estate Solutions For Real People

I think it would depend on whether I wanted to buy and hold or flip it. Overall, I like the aspect of going green, though.

Nov 14, 2008 02:15 PM
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

All things being equal, I would have to balance the payoff of the green features.  I'm not saying that I wouldn't buy it if the payback was too long, because I know that energy can be volatile.  But, if the payback were 50 years... I would probably go for the less expensive alternative. 

Nov 14, 2008 02:19 PM
Mick Michaud
Distinctly Texas Lifestyle Properties, LLC Office:682/498-3107 - Granbury, TX
Your Texas Lifestyle is Here!

So, not to be personally judgemental, but using the two responses so far as a public opinion barometer, we (Americans) are only paying lip-service to the idea of "green", it's really all about the bottom line in the current market conditions? 

What about the other benefits, both tangible and non-tangible?  Do they factor in at all?

As far as flipping houses goes, green or not doesn't really come into the picture, that is truly a current market situation.

How do you as RE professionals counsel your clients regarding make a "green" purchasing decision?

 

 

Nov 14, 2008 02:27 PM
Katerina Gasset
Get It Done For Me Virtual Services - Wellington, FL
Get It Done For Me Virtual Services

Mike- I would not buy it for that much more. I am all about making good choices, even green. While I do pay more for organic food and non toxic cleaners, I make those decisions based on better health for my family. I believe the green thing has been blown way out of proportion and there is just too much regulation and mandates taking over our lives in the so called global interest in global warming, which if you follow the money is all about the money.

Nov 14, 2008 03:09 PM
Mick Michaud
Distinctly Texas Lifestyle Properties, LLC Office:682/498-3107 - Granbury, TX
Your Texas Lifestyle is Here!

Nestor & Katerina (don't know which of you commented).

To your assessment of mandating "green", I say AMEN! Get the feds and global climate goons out of it!

I am very much a free-market capitalist.  And as such, I see great value in going green.  Being free market driven, if the need exists, fill it!  And it is along those lines that I can cost justify certain green technologies and construction techniques.

FYI,

If I were to present you the option of two identical looking homes and told you the mortgage payments on these two homes were $1500 and $1740, which would you choose? 

 

Then, I showed you (as Paul Harvey would say, "The rest of the story")

Insurance:                        $300     $180

Utility pmt:                        $300    $150

Total monthly costs:  $2100 vs $2070 in today's dollars, not counting any energy price increases that we know will be coming.

Now which would you buy?  The lower total monthly out of pocket home is actually $40K more in price.

And that is money in your pocket the first month of ownership.  It is immediate payback.  Those numbers represent a 40% reduction in insurance and a 50% reduction in utility costs. 

 

The point is, take the government out of it and give people the entire picture, and they will choose what makes sense.

 

Nov 14, 2008 03:26 PM
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

Mike, it isn't that I would look at it on a short term basis... but rather that I WOULD look at the overall picture. 

A friend of mine bought a Suburban a couple of months ago.  Gas was $4.25/gallon.  The dealer sold this 1 year old 'burb for $22k.  They had a new Prius on the lot for $31k... they were taking advantage of the gas price spike.  For $9,000 he could buy 2,117 gallons of gas.  For the 15 mpg that the Burb gets, that covers him for almost 32,000 miles.  And if you figure that the Prius gets double, then the payoff at $4.25/gallon would be closer to 64,000 miles.  Now that gas is at $1.80/gallon, he has actually made a better financial decision. 

And he probably won't put 50,000 miles on the vehicle in total anyway...

Nov 15, 2008 12:52 PM
Danny Thornton
R & D Art - Knoxville, TN
WordPress Guru

Mike, personally I think that you should buy and drive what you want.

Nov 15, 2008 02:45 PM
Mick Michaud
Distinctly Texas Lifestyle Properties, LLC Office:682/498-3107 - Granbury, TX
Your Texas Lifestyle is Here!

I totally agree with buy what you want.  There are so many other considerations to purchases than just finances. 

And as Lane points out above on a Suburban vs a Prius, he illustrates the point nicely.  Cheaper energy will hinder green industries, all due to market forces.  If green was cost effective before, we'd already have it.

And because of that bit of psychology or market dynamics, many want to limit your choices via legislation, i.e. make it illegal to choose what you want.

If the technology can make the case for itself in the open marketplace, then it will thrive.  And I've been making the market case on these types of homes since 2000.  No smoke and mirrors, no legal threats.

Thanks for the comments.

 

Nov 15, 2008 03:22 PM

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