Energy standards in play for 2011

New and revised energy standards for 2011 could make this an interesting year for both existing home owners and those looking to buy a new home. Here's a quick look at some of the changes on tap:

• Revised Energy Star guidelines: Products and homes looking to label themselves as Energy Star certified will have to meet more robust criteria. New specifications for many products and appliances became effective January 1. New criteria for home construction will be phased in during the year and fully implemented by January 1, 2012.
  
• Incandescent bulbs on the way out: Rules passed in 2007 (The Energy Independence and Security Act) are already having an impact in the marketplace to phase out incandescent bulbs. Most rules don't take effect until next year, but IKEA is already removing them from their shelves and other retailers could follow suit. Many argue that we are needlessly losing a cheap alternative, but whale oil lamps were cheap a century and a half ago too. Flourescent and LED bulbs continue to get less expensive, come in more shapes and colors, and will allow you to keep more money in your pocket over time.
  
• Tax credits extended: As part of the tax compromise passed at the end of 2010, many home improvement credits were partially extended. Renewable energy credits (for items such as geothermal and solar power systems) remain in effect through 2016.
  
• Ohio building codes for energy efficiency: Debate is taking place on the implementation of improved base standards required for new construction. Some builders are resistant to increases in areas such as higher R-values for external walls making the argument that it will add to costs during a recession. The new standards are already in place in states like Pennsylvania and Michigan.
  

As always, expect some of these to be controversial, but for the most part they should be good for consumers' bottom line. I anticipate we'll see some new technologies become more commonplace (such as the continued Duke rollout of Smart Meters) and greater competition in the electric and gas utilities sector.

The Great Disconnect

Call it a result of the Great Recession, but a look back at the last year left me pondering the current buyer - seller disconnect in housing. What I am referring to is how there is a huge gulf in the mindset of home buyers vs. sellers when it comes to negotiating what constitutes a fair deal.

First, let's take a look at sellers in the current market. Many purchased their current home when the market was booming a few years ago. The average move is once every 7 years. Using that as a guideline, that would suggest the current home now on the market was purchased in 2003 - 2004 when home prices were really starting to take off.

No one likes to take a loss on what is supposedly a large asset, but even suggesting they will see a loss of 5 - 10% STILL causes a stunned disbelief (surely not My house!). My question is how does this compare to your 401K performance in the same period? 5 - 10% is the average price decline for many Cincinnati area neighborhoods. Some areas have experienced steeper declines, but these are mostly in "starter home" subdivisions where builders were offering 125% loans and where foreclosures are an outsized portion of the inventory.

The reason that it feels like they are taking such a large loss is due to the leverage factor. That is, most people carry a mortgage that, once paid, may leave them with nothing to show in equity - or worse, owing money to payoff a loan. Many overlook that it is this same leverage factor that during good times allows them to build equity faster.

Buyers, on the other hand, have seen too many news stories about the foreclosure debacle and have a mistaken impression of how everything on the market must be available at all time bargain prices. Are there bargains to be had? Absolutely! Is the house that you have just fallen in love with available at 75% of market price? Uhmm, probably not.

It often takes buyers entering this market some time to realize that we still see homes that are in top condition and priced well sell very quickly and close to asking price - even getting multiple offers. If you come across a house that you think is great, chances are every other buyer in your price range probably thinks so too. If you want a bargain - look at the house down the street that needs some work and has been on the market for the better part of a year.

These buyer / seller conditions has led to lengthier negotiations, more failed offers, and a feeling of dissatisfaction on both sides that they aren't getting the deal they should (sounds like Congress, eh?). Looking forward into the new year, I anticipate conditions to remain the same for a bit longer. That said, I do see more buyers entering the market, sellers being more realistic about price, and overall economic news being more positive. One can only hope that bodes well for 2011.

Looking like a long winter for home sellers

The latest pending sales for October came out today. Unfortunately, not in the direction one would hope for: falling 1.8% on a monthly basis and 24.9% down from October 2009.

Looking past the foreclosure mess that came roaring into view last month, most housing activity showed slight growth from the summer's dismal readings. While sales have shown a modest uptick from August, inventory continues to be the weight keeping prices low and buyers on the fence.

Locally, September's monthly sales were down 30% on a year over year basis. Inventory increased by 8% from September, and the inventory to sales ratio was still elevated at 11.5 months.

Regarding existing home sales, the faint glimmer of light was an increase in sales price - but that is attributable mainly to fewer foreclosures and first time buyers as a percentage of overall sales (so, no, sellers - don't get the idea that this means you can raise your asking price).

(See local Cincy MLS-based charts here)

On a national level, the existing home sales drop year over year wasn't quite as sharp, but still high with a 19.2% decrease (seasonally adjusted). One positive sign was in new home sales, rising 6.6% to a seasonally adjusted rate of 307,000 units annually. Not exactly boom times, but moving in a positive direction.

At this stage of any nascent housing recovery, it is hard to see what will inspire potential home buyers back in the market. Low mortgage rates don't seem to be doing the trick. It may be that any real growth will have to wait until unemployment rates have shown a steady decline and the fear of declining house prices has passed.

All fired up

Winter gray is starting to make its presence known and thoughts of a cozy fire may be something you look forward to. The question is, will that fire actually provide some heat, or simply be something nice to look at.

You've probably heard that older style, open masonry wood fireplaces can lose more heat than they provide, but there are ways to address those problems. Here's a few options you might want to consider, gain real benefits from your fireplace, and maybe save a little money too:

• Keep the hot side hot / cold side cold. One of the biggest issues with an open fireplace is that they can be extremely drafty. When not in use, find a way to keep your warm indoor air from literally going up the chimney. A piece of batt insulation behind the flue opening or a chimney balloon can be a good way to close the draft - just remember to remove if you actually build a fire.
• Open a window. As counter-intuitive as this may seem, providing a small level of outdoor air for combustion (such as opening a window slightly in the same room and closing off the room from the rest of the house) can help prevent warm air in the rest of your home from being pulled out the chimney while a fire is burning and your flue is open. This option is intended for those looking for ambiance from their fireplace - not heat. Alternatives exist to create a separate air intake that performs the same function without closing off from the rest of the house, but this is a more expensive approach.
  
• Glass doors. A modest step towards keeping warm air from being pulled from other rooms. Inexpensive and easy to install. However, this is also more of a fix when the fireplace is used for ambiance as opposed to gaining any real heating efficiency.
  
• Inserts and hearth stoves. There are a wide variety of choices (and prices) for installing a "closed" system that will preserve the heat created from a fire and put it into the living space. These can be as simple as installing a "heat exchanger" that captures the heat and uses a fan to push it into your living area, a "stove" that sits on the hearth and makes use of your existing chimney, or even a fully enclosed firebox that is installed in the existing opening (this last choice usually being the most efficient - but also the priciest).
  

If you can afford them, inserts and stoves offer an additional benefit in that they burn wood far more efficiently and produce less emissions than an open fireplace. Interestingly, homes in Cincinnati do seem to have a high percentage of open fireplaces regardless of the price point. Here's to making the most of them.

For more info on inserts, check out these websites:

• Woodheat.org
• Comparison of some high-efficiency inserts
• Energy Savers overview of wood and pellet heating