For most Americans who own their home, it is far and away their single most important asset. Not just because it is their largest asset and tool for wealth accumulation (which are both true), but also because it is where we live, spend time with loved ones, and a place to make our own.
Perhaps not surprisingly, many homeowners think about investing in upgrades around the same time as buying their home. According to research from the Harvard Joint Center for Housing Studies (JCHS), a recent home purchase is often what prompts home renovations, particularly within the first 2 years. And a Houzz survey found that 25% of those renovating were updating a recently purchased home.
What may be somewhat more surprising is the increasing percentage of those home renovation budgets that is now being directed to energy efficiency upgrades. Spending on projects like HVAC upgrades, insulation, and energy efficient appliances today is roughly three times what it was in 2001, with much of that increase related to the aging housing stock. The majority of homes in the US were built before 2000, and the JCHS research found that 17% to 20% of homeowners living in those homes completed home efficiency projects, compared with about 11% of homeowners in homes built in 2000 or later.
Upgrades in action
We were curious to see how different efficiency projects impact older homes versus newer homes, so we pulled a sample of homes from Asheville, NC and Minneapolis, MN. Given we know that many homeowners consider upgrades around the same time as a home purchase, we honed in on properties in those locations that were sold in the last 18 months. And we decided to take a closer look at two specific upgrades that can be particularly applicable in older homes: insulation and water heaters.
What we learned
A couple of things jump out that will not surprise most people. First, the climates in Minneapolis and Asheville are different - but mainly as relates to temperature, both are considered to be humid climates according to IECC (International Energy Conservation Code) standards. The second is that the average age of the houses varies quite a bit. In Asheville, the vast majority of homes were built after 1980, when many updates to modern building codes went into place. But Minneapolis, like many older cities, a majority of the homes are older than 1980. In fact, close to 90% of homes in Minneapolis were built before 1960, almost the reverse of Asheville.
Differences in upgrade results
In the older homes (before 1980) in both Asheville and Minneapolis, insulation projects are projected to have a larger impact on both utility bill savings and emissions reductions than upgrading to a heat pump water heater. A heat pump water heater can be two to three times more efficient than a conventional water heater so there are expected savings from that upgrade as well. However, in both locations, if homes haven’t recently invested in projects like new windows or attic and basement insulation those would be high impact projects to consider.
In Minneapolis, the potential impact of improved insulation is even greater. Cold humid climates and older homes are a combination that nearly always starts with a review of the home’s enclosure and current insulation. In Minneapolis, when we looked at the combined impact of installing both a new heat pump water heater and insulation updates, for those older homes 90% of the energy bill savings and 77% of the emissions savings came from the insulation or enclosure projects. Whether homeowners have money savings or climate impact (or both!) on their mind, that would be a very good place to start.
Takeaway
Taking stock of what's in a home and which upgrades can provide the most benefit can be a useful exercise for homeowners budgeting for home renovations. And energy efficiency upgrades with the potential to save money in the long run on utilities can be particularly impactful.
Sources: This article includes information sourced from Joint Center for Housing Studies report Improving America’s Housing 2023, 2023 U.S. Houzz & Home Overview of U.S. Renovation in 2022 & 2023, and U.S Department of Energy.