A Tale of Two Houses (Less to Build vs. Less to Own)

A couple stopped by my office recently and inquired about building a new house. Since we have been building houses for about 40 years, this was no surprise and it also didn’t surprise me that they didn’t have drawings yet. Their thoughts were pretty vague about what they wanted except for two things. They had a strict budget and were concerned about energy efficiency.   They had already looked at some older existing homes and they also had their eye on a piece of land that they liked. So they were trying to decide whether to build a new energy efficient home from scratch or buy an old one and fix it up.  They stressed that energy conservation was at the top of their list and wondered if they could afford one of our custom designed “High Performance” homes. I was impressed that they had done their homework and had emotionally committed themselves to investing into performance and efficiency before spending their money on other more visible things that they knew could wait.      

            It was a delightful change of pace to meet with potential home-builders who were more concerned about energy conservation than they were about dream kitchens, window walls, expensive flooring and tile and home theatres. They wanted these things too, but they had decided that the most prudent thing to do was to invest into the performance of their home first.  Once they had lived in it for a while and enjoyed the benefit of hardly any energy costs, they could use that savings to spend later on cosmetic enjoyments.

            They asked me to do what I love to do the most and that was to explain the long term benefits of investing into sustainable strategies first. I told them that there are three main benefits and they are: “Performance, Payback and Peace of mind”. 

            After showing them our four minute introductory video, we talked about a variety of subjects including types of insulation, thermal barriers, managing indoor air quality, and advanced framing techniques, their eyed didn’t even glaze over!  I thought I was in builder heaven.  They were full of questions about renewable energy options, and how over the span of a thirty year mortgage, their operational savings could be as high as $200,000.00 compared to an identical house that was built to minimum energy codes.  It’s rare when I get this far with prospective first time homeowners. I have to admit that my own exuberance about this subject sometimes comes on a little bit strong. 

            But this couple had already educated themselves, watched our video and they connected with me.  They knew that once they moved into a home, the next big ticket on their list of concerns was to save up for the education of their children. It worried them that unpredictable energy costs could wipe out their savings and that any other home besides a “High Performance” home could become a liability rather than an investment. They understood that anything but a Hi-Performance homes become less attractive to own, which translated means “Less valuable for resale”.     

            As we sat there looking into the future, I reflected on past and said, “It was only a few years ago, when houses were built with more or less the same materials and methods and the resale value of comparable homes were affected mostly by market trends, location and comparable sales. But things have radically changed since then and I doubt that we will ever return to those days.” 

            I could see that they were listening so I continued, “Now let’s imagine ten years from now that you are moving out of the area and need to sell your house. Somebody else is moving into this area and is looking to buy a house. There are two houses for sale that catch their eye and they are beside each other. One house is yours and the one and the other one is your neighbor’s house. Both houses have great curb appeal. From the outside, it is clear that both houses are extremely well built and maintained. Likewise, their interiors are equally as attractive. There’s virtually nothing wrong with either house.” 

            I continued, “When you built your house, you invested into sustainable strategies but your neighbor did not and now that 10 years has gone by, you have recovered all the money you invested and about $8,000 more because your annual energy bills are almost nothing. But your neighbor’s house consumes about $3,500.00 in energy costs and every time the cost of fuel and electricity goes up, their annual costs increase with them. Although your neighbor’s house cost 10 percent less to build than yours did, their energy costs have doubled since they moved in but yours remain unchanged. Not only that, your house has heating and cooling while theirs only has heating. You are really glad you invested prudently because now you have peace of mind while the other owner is getting more and more anxious every time energy costs go up. You also have peace of mind because you have not only recovered more than your initial investment, it’s obvious that your house will sell for a much higher price.”

I also brought up the fact that because after they sell their house and move, that they would become a buyer again, and a much more savvy one at that.  I said to them, “Now suppose you are that person standing across the street and looking at two beautiful houses that were identical in size and design.  After benefitting from owning a “High Performance” home, would you really consider buying one that was wasn’t?”

Times have changed quickly. Only a few years ago, if you were looking to buy a house, and you had two homes right in front of you, I bet the most important thing you would want to know is “Which of these two houses cost less to buy?”   But that was then and now is now.  I believe that the question isn’t going to be, “Which of these two houses will cost less to buy but which one will cost less to own?”