Foreclosures hampering green homes

By Buck Wargo

Fri, Feb 5, 2010 (3 a.m.)

Foreclosures that are depressing home values could temporarily slow the incorporation of green features into homes, a consultant to the homebuilding industry said.

That was one of the issues that emerged at the 2010 International Builders Show in Las Vegas in January when manufacturers were touting the latest in energy efficiency for appliances, window insulation and water conservation measures.

“The problem now facing the industry is that we can’t get the appraisers to value those improvements,” said Bill Nolan, owner of Florida-based Nolan Group, who took part in a conference on green innovations. “They are setting the valuation of housing on foreclosures in the neighborhood. Until they solve that problem, it not going to bring (green construction) to a screeching halt, but it is going to slow the process.”

Contractors aren’t interested in building those extra features if they aren’t going to be appraised because they would lose money, Nolan said. Lenders base loans on the appraised value of the home.

The National Association of Home Builders and other groups are working with Congress and the Federal Deposit Insurance Corp. to solve the problem, but no solution has been found yet, Nolan said.

The novelty of green has worn off, and it has become an accepted part of the housing industry, Nolan said. Contractors are using it and consumers are looking for it, and so it’s frustrating to deal with the appraisal issue, Nolan said.

One obstacle faced by the industry is that some homeowners haven’t made the connection that adding green features to a home costs more, Nolan said. That extra cost can be recouped over the long run by lower energy costs, he added.

Some homeowners say if they aren’t going to live in the home for very long, and ask “why spend more on the price of the house?” That causes them to pass on the better insulation or better-insulated windows and other energy-efficiency features, he said.

“I think one of the good things about the recession is that people might be inclined to stay in the homes longer,” Nolan said.

James Canton, CEO of the Institute for Global Futures in San Francisco, said green is a trend that will grow in importance.

“The reason this trend has emerged is because one very important part of the marketplace — the consumer — has embraced this,” Canton said. “Their interest is starting to awaken. We have seen early examples of this in Europe.”

The green movement covers every business category from clothing and pharmaceuticals to housing, Canton said.

Companies have a chance to differentiate themselves from the competition if they understand this trend and incorporate it in their business strategy.

“Now is the time to do that. In the interest of long-term sustainability of their business, they must adopt it,” Canton said.

Canton said 98 percent of consumers view themselves as environmentalists, and they have made the decision they want green products and services. It has grown over the past three years because of concerns about climate change.

“Understand that consumer demands are going to shape this marketplace. It is not driven by efficiency or price but social responsibility,” Canton said. “Wake up and smell the coffee. Increasingly, people are making decisions whether to spend a dime or a dollar, they are asking the question of ‘does it improve our personal health?’ They want to know if it is going to harm the environment or help the environment.”

Businesses should designate an employee as their chief sustainability officer in dealing with green issues, Canton said.

The movement for businesses is about educating and empowering consumers with information that not only makes them interested, but willing to buy even more than they planned, Canton said. For businesses, it comes down to gaining more sales.

For someone in the housing industry, that may be advising people on solar usage and roofing products, for example.

“You have got to learn about that and become the expert in that,” Canton said. “Consumers are unaware of the choices and they need a trusted adviser.”

The housing industry will be an important part of the green wave because a person’s home is his or her largest investment, Canton said. Homeowners will want green features to increase marketability in the long run as well, he said.