Green Builders Thwarted by Housing Market, Utilities

December 30, 2008

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Low-energy housing developments that sprung up around the country when energy costs soared earlier this year are facing lukewarm reception from home buyers, writes the AP.

Since July, the price of oil has plunged from $147 a barrel to about $36, making the need for energy-efficient houses less urgent. Costly additions like solar panels add thousands to the overall cost of a home, which in the current housing market, can be a dealbreaker.

Meritage, for instance, put $20,000 worth of solar panels, insulation, low-leakage air ducts, and other expensive systems into a green community in Vacaville, CA. Because they cut electric bills in half, people were buying into the development at a rate of 1.55 homes per week.

Those days are long gone. Meritage and its closest competitor sold averaged a mere one home every two weeks in November, and it was forced to slash prices to attract buyers.

Builders do have an alternative to their bigger environmental projects, said a UBS analyst. They could add Energy Star-rated appliances in homes – which would not drastically hike up the price of the home – that would still cut utility bills.

Consumers still want money put back in their pocketbook, said Ed Gorman of Modus Development in Phoenix, AZ. Good design that incorporates efficient heating and cooling systems, dual-pane and radiation-filtering windows, and high-performance insulation will still sell, even in a tough housing market.

Many builders who undertook pricey green projects earlier in the year are in a holding pattern until sales improve. Financing without significant pre-sales has become near-impossible to obtain, Gorman notes.

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