Trying to be rational in an irrational world

iStock Photo of Family at their new house
Think about the last time you went looking for a new car. What did you look for?

You probably started with your needs for the vehicle and the style of the car you wanted. You then considered the miles per gallon (mpg) of the car, looked up the crash test rating and then read online reviews from car owners about comfort and maintenance. Obviously, the sticker price is a determining factor. And finally, you probably ended up test driving the car to see what it’s like in person before buying.

 

Now, what if I told you that you must make that same vehicle purchase decision, but only based on the dimensions of the car, the features, some pictures of the interior, and the price?  Do you think you could decide on which car you would want?

You would say I am crazy and that you wouldn’t make the decision on such a pricey purchase with so little information. But, that is exactly what millions of people do when making a significantly more expensive purchase… a home.

 

A Home Comparison

Look at the two homes shown in the table below. Which one would you pay more money for? Other than a wider driveway and new siding on the home on the right, these two homes appear to be identical, so you would likely expect to pay about the same for both homes.



In fact, these two homes are one and the same, just pre- and post-retrofit!

In a rational world, you would value the home on the right significantly more. There are several key enhancements that the home on the right has that make it more valuable.

Using the car analogy, what are the mpg-like metrics for a home?

The home on the left spends $5,700/year on utilities, while the home on the right spends $1,600/year. What would you do with $4,100 more each year? Simply apply those utility savings to additional mortgage payments and you would trim years off your mortgage.

Comfort?

Just because a home has a heating/cooling system, doesn’t mean it is comfortable. The home on the left was drafty (infiltration rate of 7.1 ACH50) versus the tight home on the right (infiltration rate of 1.9 ACH50).

This resulted in significantly more space conditioning since air was lost to the outdoors. It also meant that the temperature throughout the home on the left would vary by 5°F, while the home on the right maintains temperatures within 1-2°F of the thermostat setpoint throughout the home (with the addition of upgraded HVAC as well).

How about durability and maintenance?

There are several items that separate these two homes:

  • The house on the left had issues with water intrusion at several retrofit windows that allowed water to get into the walls. The house on the right has properly installed windows and a continuous drainage plane on the exterior facade.
  • The house on the left had window A/Cs, so these need to be installed each spring and removed/stored each fall. The house on the right doesn’t have to deal with this issue.
  •  The house on the left had wood shingle siding that was in poor condition and peeling paint. The house on the right has fiber-cement siding.
  • The house on the left had to deal with oil deliveries (and volatile oil prices), the house on the right does not.
  • The house on the left lost power a couple times a year when the utility power went down. The house on the right does not (even when all the surrounding neighbors didn’t have power for several days).


Lastly, what about health?

Would you buy a car that could make you sick or had a poor safety rating? The house on the left had an issue with mice infestation. Thankfully, the house on the right no longer has this issue. After finding mice feces and dead mice everywhere in the home, the previous homeowners were contacted to see if they had health issues. All their kids asthma symptoms were minimized after they left the home.

Clearly, these two homes are not worth the same approximate value as illustrated above.

 

Make Home Buying More Rational

There are many efforts to make valuing healthy and efficient homes a more rational process. For instance, the Department of Energy (DOE) has been coordinating with the Appraisal Institute regarding green appraisals[1],[2]. Additionally, there are numerous municipalities and even entire states that are starting to include a HERS Index in MLS postings to provide an efficiency metric that can be used by buyers to compare homes.

There are many other efforts being done at an industry level, but what can you do the next time you are looking for a home?

You can learn a surprising amount by requesting utility bill data from previous homeowners and talking to surrounding neighbors. Select a home inspector that has expertise on health issues, such as pests, radon, and mold. The way to change the housing market is for the consumer to demand more.

It will take time, but it is time for us to start acting rationally when it comes to the largest purchase that most of us will make in our lifetime.

 
Blog adapted from Steven Winter Associates blog, Party Walls, and written by Srikanth Puttagunta, Principal Mechanical Engineer on May 24, 2018. For more information, swinter.com/party-walls/ Header image by iStock