The Sonoma County real estate market is improving and prices are moving higher. Each quarter there is less inventory for more buyers. Year-over-year sales of single family, re-sale homes, were up 2%. The average price for homes rose 8.3% year-over-year. Last April 2013 the average home price was $535,804 compared to this April 2014 the average home price was $579,685. The sales price to listing price ratio was 99.1% during the month of April 2014 meaning buyers are paying asking price and in some cases willing to pay over asking price in order to win the bid. The Sonoma County housing market is tightening meaning more competition for buyers and higher prices for sellers.
Buyers may find that they are being priced out of the market as houses sell over the asking price. Spec builders, resellers and flippers are beginning to see green as prices rise. Some may lose potential buyers as their pool of qualified prospects shrinks. There is an overlooked method of financing that may mitigate a degree of price escalation; the “green mortgage.” An upgraded or new energy efficient home qualifies for an Energy Efficient Mortgage or an EEM. One of the best tools for making a home more marketable and more affordable while saving on the cost of power, heating and cooling is the “green mortgage.”
EEMs or “green mortgages”are Federally recognized and can be applied to most homes. EEMs provide the borrower with special benefits when purchasing a home that is energy efficient, or can be made energy efficient through the installation of energy-saving improvements. Most energy efficient mortgage, or EEM, lending programs let the borrower qualify for larger loans by adding the cost of making the energy efficiency improvements or by purchasing a more costly home already Energy Star rated or energy efficient rated. Some “green mortgage”products provide discounts on fees or reduced interest rates for homes that are energy efficient.
Energy Star Mortgage products target home buyers who are buying new homes or refinancing existing ones to encourage them to make the homes more energy efficient. Energy Star homes are required to save a minimum of 20% on energy costs. Like most other green mortgage programs, Energy Star mortgage products incorporate the cost of energy saving into the loan value.
FHA programs allow for up to 5% or $4000 of the energy efficiency improvements to be financed. The limit may increase if the FHA green loan is used for weatherization improvements, photovoltaic panels or solar water heating.
Fannie Mae allows buyers to increase their debt-to-income ration by 2%. The idea being a larger monthly payment will be offset by lower utility costs. In the case of a new or already energy-efficient home, homebuyers can increase the mortgage amount by an additional 5% of the home’s value.
All buyers who qualify for a home loan qualify for the EEM. The EEM is intended to give the buyer additional benefits on top of their usual mortgage. Energy Efficient Mortgages can be used on most homes. Availability is not limited by location, home price or utility company.
On the topic of Green Mortgages, part 2 will look at the benefits of green mortgages when utilized by Buyers, Resellers and Flippers.
Article written by Broker Associate, David Cooper who joined the Terra Firma Global Partners Sonoma Offices in 2014. With a long family history of real estate development and over 25 years of experience in the commercial arena, David now looks to focus much of his energies and attention to energy efficient, sustainable and healthier features in homes and buildings. David carries both the CCIM (certified commercial investment member) and EcoBroker Certified designations’ giving him significant skill sets to complement Terra Firma Global Partners current client services.