Should your next home be LEED certified?

If you are concerned about your home being more energy and eco-friendly, then you may have already heard of the LEED (Leadership in Energy and Environmental Design) certification some builders are pursuing for their new homes. While only a handful of homes in the Cincinnati metro have been certified, its time to ask whether the certification is worth it, if it will be the standard to follow, and whether we can expect to see more homes getting certified.

The LEED certification has primarily been focused in commercial buildings as the overall operational cost and "health" of the buildings is of greater concern and where it is easier to achieve long-term savings. Keystone Park was the first office building in Cincinnati to reach a silver level 'Core and Shell' standard. Several other buildings have achieved various levels for new construction standards. In the commercial world, the additional cost in building to LEED standards has already proven its worth financially.

The LEED standard for homes was first published in December 2007 and is now beginning to gain some traction. So, to the first question for residential development - is it worth it? Some will surely see the practice as worth almost any extra cost relative to the reduced environmental impact. Statistics on cost are a little difficult to come by, but consider that of 36 LEED homes in Hamilton County, only 3 were available below $400,000 suggesting that builders see effective margins only at the upper end of home sales. Furthermore, most of these homes were over 3800 sq. ft. in size. While it is commendable to build using standards that lessen the environmental impact, it's also fair to ask how green you are in a 4000 sq. ft. home.

One immediate impact in the city of Cincinnati is a special tax abatement for LEED certified properties. That's probably worth the price of admission itself. What we won't know for a while is whether the certification or its environmentally friendly features will add value on the resale. What I would also hope to see is a standard that builders apply to homes that are more in line with the median sales price for our area.

The US Green Building Council, which is the sponsor of LEED (and is not a government organization), itself acknowledges that there are over 70 different green building standards in existence today. Whether LEED is the "best" standard is a highly debatable subject, nevertheless it does have certain advantages including a nationally recognized organization, a system for 3rd party verification, and a process to measure the effectiveness of the standards and make improvements.

Can we expect more LEED-certified homes? Undoubtedly. If nothing else, some builders will see LEED as a marketing advantage to eco-conscious consumers. We already see this with Energy Star rated homes as the value has proven itself. The longer-term question will be how soon LEED-certified homes are available at mid-price points and yet profitable for builders. As with any new technical approach, costs are almost certain to go down over time as use increases.

Ultimately, having a home that is LEED certified can provide you with an assurance that your home was built to a specific standard. It's in your best interest though to work with a real estate professional that can help you sort through the variety of "green" building standards coming on the market to determine what's best for your situation.

For more information on LEED, visit the Cincinnati chapter of the US Green Building Council.

December and 2008 housing in review. Back to reality?

December and 2008 numbers are in, and, as you’d expect, the Cincinnati housing market shows a considerable slowing of transactions for the year. On the plus side, the “absorption rate” – or how much inventory is available at the current sales rate – fell to 10.4 months in December. This is better than December 2007’s rate of 10.8 months and a good drop after November spiked to 12.6 months. Some drop was expected as sellers took homes off the market during the holidays and banks held off foreclosures. Nevertheless, you sometimes take the good where you can find it.

Some other highlights for December and 2008 is that sales averaged 56 per day. After 2005 peaked at 79 per day, this would appear as a pretty significant decline. However, if you strike out the “bubble years” between 2001 and 2007, the “sales per day” figure is relatively in line with the mid 1990’s to 2000 reflecting a more sustainable level of home sales.

View December’s monthly absorption rate and the sales vs. inventory charts

While I and other agents I talk to have seen an increase in buyer activity after the first of the year, there are still a few aspects that will keep inventory rates slanted towards buyers for a while including:

• high number of foreclosures and distressed sales continuing to enter the market, keeping inventory high
• difference in value expectations between buyers and sellers (many sellers still expecting ’07 prices, many buyers expecting 25% or more off the asking price).

Positive trends likely to help the market in the near future include:

• mortgage rates at historical lows, increasing affordability
• first-time buyer tax credit of $7500 (especially if converted to a permanent credit that does not require repayment)
• more sellers willing to offer lease/purchase or land contracts on their homes

As the statistics return more in line to historical norms, the question will be whether 2009 is a transitional year or if the market “over-corrects” before stabilizing. Stay tuned….

New year reminders for Ohio homeowners

The new year dawns and our minds inevitably turn to….taxes. Perhaps one of the lesser highlights of the year, but an important one nonetheless. If you are a homeowner, then you should be aware of the following tax-related issues.

Ohio Homestead exemption: This special allowance enables homeowners that are disabled or senior citizens to shield $25,000 of home value from property taxes. The catch is you must sign up for this exemption between January 8th and June 2nd. Check the Ohio Department of Taxation website for details.

New home property assessments: Homeowners in Hamilton, Butler, and Clermont counties received new property assessments in 2008. Many individuals were surprised to see their values go up when all the news stories suggests home prices are down. While many factors go into the assessments, you do have the option to appeal in case you think your assessment is too high. Again there are time limits though. For example, in Hamilton county you must file a complaint on the valuation prior to March 31, 2009. For more information on the appeals process, consult these county auditor websites:

• Hamilton County Auditor
• Butler County Auditor
• Clermont County Auditor
  

Energy improvement credits: Most energy efficiency credits expired at the end of 2007, only to be renewed in 2009. However, certain renewable energy incentives for geothermal and solar based equipment were available for '08 (along with hybrid vehicle credits). For a complete overview of energy based tax changes, see the Alliance to Save Energy website.

Itemized tax deductions: The granddaddy of tax deductions is real property taxes and mortgage interest. A majority of homeowners find that they benefit when they itemize deductions vs. taking the standard deduction. If you do your own taxes, most tax software will determine which method will benefit you the most.

Points and Mortgage Insurance: This is another area where certain mortgage fees may be deductible. If you paid points or mortgage insurance when you purchased or refinanced a home, then you will want to take the appropriate deductions.

Investors: Those of you with rental property are probably already familiar with rules around depreciation and passive activity investments, but work with your tax advisor to take full advantage of improvements and other deductions.

For all the details on homeowner tax deductions and credits, go to IRS.gov.