One oft-cited explanation for underinvestment in residential energy efficiency is that homeowners do not expect to occupy their homes long enough to realize benefits that offset their investment costs.  This is problematic because homeowners may not believe that the energy efficiency features of a home will be capitalized in the selling price.  In this paper, we look for evidence of such capitalization using data from real estate multiple listing services (MLS) in three metropolitan areas:  the Research Triangle region of North Carolina; Austin, Texas; and Portland, Oregon.  Realtors participating in the MLS services in these regions report a set of “green” characteristics on home listing sheets. These data include information on green and energy efficiency certifications.  We examine over 400,000 housing transactions in these markets to identify how these certifications, which include the Energy Star certification for new homes and local green certifications in Austin and Portland, affect sales prices.  

We estimate separate models for the three cities. Our results suggest that Energy Star certification increases the sales prices of homes that were built between 1995 and 2006 (1995 is the first year of the Energy Star program) but has no statistically significant effect on sales prices for homes built after 2006. This finding is consistent across the three markets, though the magnitude of the effect for the 1995-2006 homes varies slightly. As the energy efficiency of new homes has improved and building codes have tightened, we speculate that the Energy Star certification has less value in the marketplace. 

The local certifications in Austin and Portland appear to have larger effects on sales prices than Energy Star and the effect holds for newer and older homes. In Austin, certified homes sell for 9 – 20 percent more, all else equal, than noncertified homes, with the effects varying by house vintage. In Portland, certified homes sell for 5 – 12 percent more, depending on vintage. These certifications go beyond energy efficiency to encompass other green building practices such as water efficiency, landscaping choices, and “green” building materials, and these factors could be accounting for some of the price premium.  Our study is unable to tease out exactly which factors are most important, but contacts familiar with these programs suggest that the certifications are more a symbol of overall quality in materials and construction than a reflection of any specific “green” factor, particularly energy efficiency. To investigate this issue further, we compare selling price premiums from our regressions with an estimate of energy cost savings obtained using information on house size, climate, electricity and natural gas prices, and results from a previously published study of residential energy demand.  We find that under reasonable assumptions for discount rates and expected future prices, the discounted present value of future energy savings is not large enough to warrant the estimated price premiums we obtain.  Our findings suggest that further research is needed to better understand how consumers interpret home certifications and how they value the combination of “green” characteristics embodied in those certifications.