How Green Will Sustain The Housing Boom and Shock The Nation

Contrary to the popular notion that every housing boom in American history is subject to basic market conditions and foreseeable cycles, today is the day that ‘Green’ challenges these beliefs. In fact, the nation’s top real estate advisors and local property assessors concur that Green is the mainstream solution to sustain the housing boom, which conventional investors and consumers alike can no longer afford to ignore.

When the news began to spread rampantly of a slowing market, I questioned how that could be true, especially in San Diego. In doing my research, I discovered that the GRP (Gross Regional Product) ranking in San Diego County is firmly set at the 36th largest economy in the world, $141.7 Billion, since 2004, according to the San Diego Regional Economic Development Corporation. In addition, job growth for the State of California remains steady at an increase of 1.6%, or 1.44 million jobs, according to the Employment Development Department, a state agency. These are only a few indications of the strength of the housing boom and of a healthy economy, and yet local real estate agents still can’t explain or agree upon the exact reasons why properties are sitting on the market longer. As for skeptical buyers and anxious sellers scratching their heads, these numbers should mean a bright future, right?

So, then I posed a better question – “Who is buying today without hesitation or reservations???”

Recent compelling information suggests that the future of the housing boom for San Diego, as well as the nation, predominately depends on the fastest growing population in America – “The Health Conscious Consumers”, also known as LOHAS consumers (Lifestyles of Health and Sustainability), and the welfare of eco-friendly businesses that support their lifestyle choices. According to www.Lohas.com, “Lifestyles of Health and Sustainability (LOHAS) describes a $226.8 billion U.S. marketplace for goods and services focused on health, the environment, social justice, personal development and sustainable living. The consumers attracted to this market have been collectively referred to as Cultural Creatives and represent a sizable group in this country. Approximately 30 percent of the adults in the U.S., or 63 million people, are currently considered LOHAS Consumers”. Now we’ve all heard the terms ‘Soft’, ‘Slow’, and ‘Down’ Markets. So, the time has come for a shift in verbiage to explain areas in the country that are experiencing signs of economic stability via Green growth.

Enter the Era of Green Real Estate Markets – A Dream Come True!!!

Green Real Estate Market, a certain region or sub-market, which is heavily influenced and success driven by:

1. Joint efforts from conservative and progressive community leaders, business leaders, everyday activists who collect donations to assist with cleaning up, protecting, and/ or preserving the local environment.

2. Public campaigns by heavy weight, “Green Flag Waiving” political officials that push to conserve energy and encourage the use of sustainable resources, such as solar power. For example: On August 21^st, 2006, the first ‘Green Building’ holiday, Million Solar Roofs Day, was conceived by the ‘Green Governator’, Arnold Schwarzenegger, who signed a bill that will complete the landmark “Million Solar Roofs Plan,” a move which he says will put California on the cutting edge of renewable energy and boost the economy.

3. Mainstream marketing, advertising, and public relation tools such as print, television, and various recognizable brands that support the lifestyle shift.

4. The emergence of Green niche services such as Green mortgage companies, certified real estate ‘EcoBrokers’, Eco-friendly banks, and real estate advisors, etc.

5. Independent actions by local residents that demand eco-friendly homes, as well as quality commercial services, products, and materials to clean, maintain, and or remodel their existing homes, thus showing retailers increases in purchasing power while sustaining home values and increase demands to purchase Green homes.

“In my opinion, Green homes should be more valuable,” says Dave Butler, Assistant Assessor to Gregory J. Smith, the San Diego Assessor/Recorder/County Clerk. “Yet, we’re restricted (by law) in what we can do without market statistics, but when people add Green features to their homes and don’t inform the assessors office, then the statistics will remain incorrect. Obviously on the subject of changes of ownership, the presumption is the home price is the fair market value”. So, as Green begins to have a prevalent presence in the market, assessors will raise property values as the statistics will be available to support the increases. Thus, a Green Real Estate Market is born.

Continuing to Build Green Supply and Demand in Key to Survival

In January 2006, the overwhelming presence of Baby Boomers at the Annual International Builders’ Show in Florida, set the precedent that Housing in the US would remain strong overall. In addition, several front page articles posted headlines of a ‘Bright Future for 2006’, which was a vision supported by economists from Freddie Mac and Fannie Mae. However, despite the good predictions, housing prices began to cool off and inventory began to sit longer than expected; the market began to shift as buyers gained control. However, there was a lack of inventory for the LOHAS consumers, who have a strong presence in the market. So, Green can no longer be the alternative; it has to be the priority.

“I think green matters. It may reflect in either/or higher price and absorption now, but in time, everything will be greener. Then there would not be such a high price (retail) premium involved, but for now, market your properties as green. That's a good thing,” said Real Estate Advisor, Gary H. London, President of The London Group, and contributing Columnist of “Real Property” for San Diego Metropolitan Magazine.

A growing trend of mediocrity has been on the rise for years, and buyers are no longer responding to the marketing hype. New construction is taking the worst toll in San Diego County, especially in sub-markets like downtown where products (condos) are poorly designed boxes with no attempt at pleasing architecture, and the ground floor retail spaces cater only to corporate chains and franchises. In this ‘Buyers’ Market, new paint and carpeting, or even flat screen, plasma TVs, for example, are no longer purchasing incentives. Even “fancy” upgrades like crown molding, stainless steel appliances, and new tile, have failed to boost property values. Another issue to consider is that people are tired of paying high-energy costs, and they’re interested in conserving energy. According to a Cost-of-Living Index published by The Council for Community and Economic Research, or ACCRA, the cost of living in San Diego (including energy costs) is ranked the 11th highest in the nation. The LOHAS consumer makes up approximately 30% or adults, or 63 million Americans. When they pass on purchasing these undesirable products, they sit on the market longer because wants and needs are not being met, and the ‘great weather’ sales pitch is getting old.

“Today’s buyer is not responding to cheap gimmicks and empty promises, nor should they. They (buyers) are responding to superior products and features, architectural integrity (a return to form), quality construction, and Green features,” concludes Kristen Fischer, CFO & COO of YRP International, LLC, the Eco-Friendly Real Estate Development Firm that operates the Eco Investment Club. “And without dollars properly allocated to add sizzle, any project will suffer poor returns, which is a serious problem that we’re seeing with many projects on the market in San Diego.”

As for necessary efforts to successfully sell a home within an emerging Green market, “Sellers” should avoid making conventional mistakes. Intelligent steps must be taken to address the legitimate concerns of consumers by way of eco-friendly efforts that will be valued by the buyer. So, don’t underestimate the fact that ‘Green’ painted on the covers of Vanity Fair, Dwell, Fast Company, Business Week/ Small Biz, Newsweek, and Time Magazine at one time did nothing to add to the term “perceived value”. Next, you will see the descriptions of “Organic Rose Garden”, “Fresh Eco-Friendly Paint”, “New Tankless Water Heater” or “R – 30 Wall Insulation” on the For Sale flyer in front of Eco Friendly home and condos in bold Green lettering. The result would be ‘serious eco-buyer’ foot traffic and once the Green seed has been firmly planted, imagine how many more closings there would be taking place in a ‘Green Real Estate Market’.

Below is a list of real purchasing incentives, which makes ‘Green’ the new Black:

1. Interest Rate Discounts via Energy Efficient Mortgages

2. Tax Credits and Low Utility Bills using Energy Star rated products and appliances

3. Rebates and Low Interest Loans Programs for Solar and Wind Power

4. Healthy, Desirable Living Environment with Low to Zero VOC products

5. Preserve the Environment by Recycling and Reusing materials

End - Part One

By Yeves R. Perez – Monday, June 11^th, 2007

Research began: 4/2006