Study Shows that Green Home Owners are Less Likely to Default on Mortgages

There are an array of benefits that come along with owning energy efficient homes.  Owners have to pay less for their utilities, they receive a nice tax break for their home, and have modern well built homes.  Green home builders and environmental activists have argued in the past that eco-friendly homes also benefit bankers and mortgage lenders since green homes are typically worth more than regular homes. 

A recent study has shown that green homes are for more beneficial for mortgage lenders and banks than people previously thought.  The Institute for Market Transformation in conjunction with the University of North Carolina did a study on the connection between energy efficient homes and the risk of home owners defaulting on their mortgage.  The study looked at 71,000 single family homes, and 21,000 of the homes had Energy Star certifications.  The study revealed that energy efficient houses were 32% less likely to go into default in comparison to homes that lack the rating.

The study focused on home loans that originated between 2002 and 2012 so they could study the housing market, before, during, and after the financial crisis in 2008.  Since many green home owners tend to be financially well off, the researchers were careful to study subjects from a variety of backgrounds to prove the validity of their findings.  They weren't comparing modern green mansions to small homes built in the 1960s, they made sure to compare homes that were "on the same level".  Researchers took into account the size and age of the homes, along with the home value, neighborhood income, climate, local unemployment numbers, utility prices, borrower credit scores, and other variables. 

Their research did prove what people in the environmental community have been saying for years, but unfortunately nobody is exactly sure why energy efficient homes tend to default less than others.  Some people think the default rates are different because energy efficient home owners are able to save more money because of their reduced utility costs, which makes them able to devote more of their income towards paying the mortgage.  Since the many energy efficient homes have been built by their owners, some people theorize that the home owners keep up with their payments because they're more attached to the home and don't want to lose it.  Some even think that the default correlation has to do with the home owner's health.  Since energy efficient homes tend to have cleaner air, home owners are healthier and don't have to spend money on expensive medical bills.

Even though people can't explain the default phenomena, there's enough evidence to show that it exists.  Now green home owners can know that they aren't only doing their part to help the environment, they're also helping out the economy.