Freddie Mac Study finds HERS Rated Homes sell for more

A new study conducted by Freddie Mac found that homes that were HERS rated sold on an average 2.7% more than comparable unrated homes. In addition, homes that received lower HERS Index Scores sold for 3 – 5% more than homes with higher HERS Index Scores. The study also found that buyers of HERS rated homes also have more desirable mortgage profiles.

The study “Energy Efficiency: Value Added to Properties & Loan Performance” looked at homes rated under RESNET’s Home Energy Rating System (HERS) between 2013 and 2017.

The analysis of this data concluded:

• From the property value analysis, HERS rated homes are sold for, on average, 2.7% more than comparable unrated homes.
• Homes with lower HERS Index Scores are sold for 3-5% more than homes with higher HERS Index Scores.
• From an underwriting perspective, there are notable differences between HERS rated and unrated homes.

RESNET-rated homes have lower delinquency rates than unrated homes, both in terms of becoming ever 60 days and over 90 days delinquent.  Homes with lower HERS Index Scores had even lower delinquency rates. Homes with lower HERS Index Scores also had better mortgage profiles in general: owners with higher average credit scores (FICO), lower Loan To Values (LTV) ratios at origination, higher origination unpaid principal balances (UPB), higher owner incomes, and higher neighborhood incomes at the census tract level. The lower delinquency rates remain for HERS rated versus unrated homes even for homeowners with higher debt-to-income ratios of 45% or more. The study was not able to conclude, however, whether the HERS Index Scores were responsible for the loan performance over the better mortgage profiles of those who bought HERS rated homes.

The conclusion of Freddie Mac’s analysis is good news for builders, buyers and sellers of energy-efficient HERS rated homes. Not only did HERS rated homes sell for an average of 2.7% more than comparable unrated homes, but better-rated homes sold for more than lesser-rated homes—meaning homes with greater energy efficiency are being valued more.

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