By Dr. Terry Clower and Dr. Keith Waters

There has been an increasing awareness of energy usage throughout the U.S., including in Northern Virginia. Some may carefully monitor their energy use to reduce their impact on the planet, while others simply hope to save money by being more energy efficient. Regardless of the underlying reasons, such considerations impact many aspects of daily life, including real estate. Whether homeowners are seeking to upgrade to energy efficient appliances, install solar panels, or exchange batt insulation for foam, energy is on the minds of owners, as well as buyers and sellers. This article examines how energy usage impacts closed sales listed in Bright MLS.        

Energy and Real Estate Listings

An analysis of the public remarks of residential listings of detached homes, townhomes, and condos in Bright MLS that closed from July 1, 2019 through August 23, 2021 offers a sense of how energy concerns impact the real estate market in the Northern Virginia Association of Realtors® (NVAR) region.

For purposes of this analysis, public remarks containing the word “energy” were flagged. During this period, there were 47,209 closed sales in the NVAR region. Of these closed sales, 1,191 (2.5%) mentioned energy in the public remarks. Analysis revealed no seasonality regarding mentions of energy by Realtors®. The most common remarks about energy referred to energy efficient appliances (particularly Energy Star rated), energy efficient windows, and foam insulation. Less common energy features discussed in public remarks included geo-thermal heating and cooling systems, energy efficient custom shades, and custom energy efficient design and construction.

Analyzing the share of closed sales by home type reveals a clear distinction (Table 1). Of all listings of closed condo sales, 1.8% mentioned “energy” in the public remarks. In contrast, the share of closed detached home sales and townhome sales that mentioned energy was 2.8% and 2.7%, respectively. During the period analyzed, it appears that the energy efficiency of condos was mentioned notably less frequently than for detached or townhomes.

Table 1. Energy Mentioned in Public Remarks by Home Type

	Energy Not Mentioned	Energy Mentioned	All	% Mentioning Energy
Condo	11,644	214	11,858	1.8%
Detached	19,366	560	19,926	2.8%
Townhome	15,008	417	15,425	2.7%
All	46,018	1,191	47,209	2.5%

 

While the share of listings does not vary dramatically by jurisdiction within the NVAR region, there are some notable differences (Table 2). The jurisdiction with the fewest closed sales mentioning energy was Alexandria, which is likely driven by a greater share of condo sales in that jurisdiction. Falls Church had the highest share of closed sales mentioning energy (3.6%). While the total number of closed sales mentioning energy was small (12 sales), the percentage is consistent with neighboring Arlington’s higher share of such listings (3.1%). These findings may result from a greater share of such listings being detached homes, or older homes in close-in suburbs that were recently renovated.

Table 2. Energy Mentioned in Public Remarks by Jurisdiction

	Energy Not Mentioned	Energy Mentioned	All	% Mentioning Energy
Alexandria	5,422	140	5,562	2.5%
Arlington	5,479	178	5,657	3.1%
Fairfax	33,978	837	34,815	2.4%
Fairfax City	816	24	840	2.9%
Falls Church	323	12	335	3.6%
All	46,018	1,191	47,209	2.5%

 

One of the largest differences found in the share of listings mentioning energy among the groups analyzed was between new construction and existing homes (Table 3). Closed sales of new construction mentioned energy in 10.8% of public remarks. In closed sales of existing homes, energy was only mentioned in 2.4% of the public remarks. In directly examining the public remarks of newly built homes, certain home builders advertised the design and construction features of their homes that make them more energy efficient.

Table 3. Energy Mentioned in Public Remarks by New Construction Flag

	Energy Not Mentioned	Energy Mentioned	All	% Mentioning Energy
Existing	45,186	1,101	46,287	2.4%
New Construction	832	90	922	10.8%
All	46,018	1,191	47,209	2.6%

 

Despite the fact that new home builders advertise the energy efficiency of their homes, listings that mention energy are on average older than those that do not mention energy. While the difference is small (and non-existent when using median as a data point), it may be driven by the practice of updating appliances in older homes before they go to market. Two significant differences between closed sales that mention energy and those that do not, is that those that mention energy are both larger, and sold at a higher price. The average living area for listings that mentioned energy was 9.2% larger (2,230 square feet compared to 2,025 square feet). Most noteworthy is that the average sale price of closed homes where the public remarks mentioned energy was 10.2% greater than listings that did not mention energy. Other possible reasons for the higher average sales price for homes with energy mentioned in the listing may be slightly larger home size, the likelihood that it’s a detached home, or that the home has been upgraded.

Table 4. Selected Average Home Characteristics

	Energy Not Mentioned	Energy Mentioned
Average Year Built	1975	1973
Average Living Area	2,025	2,230
Average Close Price	$608,558	$677,820

 

Conclusion

As the world continues to be more energy efficient, real estate is likely to follow suit, with a greater focus on energy efficiency. In MLS home listings, the most common mentions of energy relate to appliances, windows, and insulation. Condo listings mentioned energy less than detached homes despite the fact that condos are commonly viewed as being more energy efficient due to their smaller size and frequently more central locations. Among the most notable findings is that new construction listings are far more likely to mention energy in the public remarks than existing homes. For sellers and Realtors®, however, the most actionable finding is that closed sales that mentioned energy in the public remarks sold for far more on average than listings that did not mention energy. While such findings could be driven by other variables, such as property size, the evidence suggests that if a seller’s home has energy efficient features, these should be mentioned in the listing.