Ongoing challenges posed by high interest rates. Missed opportunities to increase resale value through home performance improvements. Emerging restrictions on new development due to limited groundwater.
There are a lot of factors to keep in mind before listing your home in Phoenix, Arizona. As of fall 2023, though, interest rates might be the thorniest. They’ve placed many Phoenix-area homeowners in "golden handcuffs.” Two-thirds of the state’s mortgage-holders have an existing rate below 4%, which makes relocating and the possibility of a much higher interest rate unappetizing. They’re effectively locked into their current homes until rates drop. And that means those looking to sell will need to get strategic about how they market their homes.
Rather than rushing to list a home in an unfavorable market, then, how might prospective home sellers in the Phoenix metro area make the most of the existing situation in the near term? One answer is to prioritize home performance improvements that can increase home resale value and deliver immediate cost savings instead. To do it successfully, however, you’ll need to have the right game plan — and to plan ahead.
With that in mind, here are five recommendations that should be top of mind before you list your home on Phoenix’s ultra-competitive real estate market, based on insights from Jan Green, a REALTOR, Pearl Real Estate Network member, certified “EcoBroker,” and NAR GREEN Designee with a Master Certification for High Performance Homes.
1. Assess and Upgrade Your Home’s Shell
Making simple fixes to your home's shell should be among your top priorities before venturing into the Phoenix real estate market. An especially good place to start is with your windows, which often account for as much as 30% of homeowners’ net heating- and cooling-related energy usage.
“I point these features out any time I’m showing a home,” Green says. “I'm going to explain why they matter and how they directly connect to air conditioning, indoor temperature, and energy costs. Informed buyers in this market understand that adequate sun protection with regard to windows, doors, and skylights is incredibly important.”
When upgrading windows, doors, skylights, and more, keep an eye out for ENERGY STAR®-rated options, since implementing these products saves 12% on energy costs on average. And pay close attention to the following metrics:
U-Factor: This measures how well the window insulates (the lower the U-Factor, the better the insulation).
Solar Heat Gain Coefficient (SGHC): This measures how much of the sun’s heat comes through a window (the lower the SHGC value, the less solar heat the window permits).
National Fenestration Rating Council (NFRC) label rating: This rates windows for three factors related to energy efficiency and home performance: visible light transmittance, air leakage, and condensation resistance.
These are all elements Pearl evaluates when certifying windows, doors, and skylights for performance and energy efficiency, and getting them right matters if you’re thinking about selling your home. After all, performance-improving window replacements have been shown to deliver returns on investment of 60-70% in the home resale market, provided you pair up with a real estate agent who understands how to market high-performing homes.
And while you’re making the upgrade, Green points out, you can bring down costs by taking advantage of rebates and tax credits included in the Inflation Reduction Act (IRA) of 2022, too.
Related Post: Pearl’s Guide to Energy-Efficient Windows
2. Convert to a Heat Pump for Cooling (If You Haven’t Already)
Heat pumps have a misleading name: While “heat” may seem like the all-important adjective, these highly energy-efficient appliances are actually made to handle both home heating and cooling needs equally. And the cooling is what matters to prospective homebuyers in “America’s hottest big city.”
Green pointed out that heat pumps are already on the radar for many Copper State homeowners for these reasons and more — nearly one in three area homeowners have made the upgrade, in fact.
“Heat pumps are very popular in the Phoenix area,” Green says, but stresses that their popularity doesn’t make them any less of a value add. “What’s going to stand out to prospective buyers is cost savings associated with a heat pump. If your heat pump is fairly new and you’re willing to be transparent, you might want to show the monthly cost savings you’ve achieved with the upgrade. They’ll remember that.”
If you don’t have a heat pump but want to invest before you sell, existing federal tax credits are already on the books that can lower your tax liability by thousands. And when Arizona rolls out its home energy rebates programs under the Inflation Reduction Act (anticipated sometime in 2024), you may be able to qualify for up to $8,000 in rebates in the near future.
Before you make that call, says Green, consider scheduling an energy audit to assess your home’s air-tightness. After all, whether you’re heating or cooling, gaps in your home’s shell will quickly negate any energy efficiency your new heat pump provides.
Related Post: The Homeowners’ Definitive Guide to Heat Pumps
3. Invest in Water-Efficient Appliances
Phoenix has built a reputation as the fastest-growing city in the country, but new development took a recent hit thanks to groundwater scarcity in Arizona. As the region grapples with a “megadrought” — the most extreme one of its kind for at least 1,200 years — all groundwater-dependent residential development projects in the Phoenix metro area have been paused for the foreseeable future.
That means any new developments will be forced to tap into alternative, higher-cost water sources, ranging from the Colorado River to recycled wastewater or even desalinated ocean water — although how this actually plays out remains to be seen. But the ruling just might mark “the beginning of the end to the explosive development that has made the Phoenix area the fastest-growing metropolitan region in the country,” as the New York Times put it.
As the pause on groundwater-dependent new development continues, how this impacts the Phoenix housing market remains to be seen.
“I always warn my clients that in listing their homes on the resale market, they’re competing with new construction — but that this is an apples-to-oranges comparison and that high-performing home features can be a key differentiator,” says Green. In the meantime, she recommends investing in water-efficient, performance-improving appliances that can help position your listing as a high-value, drought-resistant and climate-resilient standout on the market, so long as ENERGY STAR labels are affixed to those appliances. Particularly high-impact options include:
Related Post: 10 Ways to Improve Your Kitchen's Efficiency & Sustainability
4. Consider Adding Home Solar
Solar panels are an investment that pays for itself within 10 years, according to multiple market analyses and yield 40-70% lower electrical bills until then. Provided you aren’t operating with a hugely time-sensitive deadline for selling, home solar just might lead to even greater ROI for you as a Phoenix-area homeowner. Why? Three compelling reasons:
First, across the Copper State the cost of solar installation has decreased by around 4% in recent years, largely due to local and state-level incentives for solar adoption. Plus, Arizona homeowners are eligible to recoup 30% of solar installation and implementation costs as a tax credit under the terms of the IRA, provided they have a tax liability to start with.
Second, as mentioned earlier, there are more heat pumps installed in Arizona than in any other state, with many homeowners relying on them as their home’s sole cooling solution — which, to be clear, is a good thing. However, these heat pumps have also shown to account for specific hour-of-day energy loads in Arizona that could lead to slightly higher energy bills. Having your own dedicated solar power source could help offset that.
Third, and related to the second point above, Arizona homeowners use more electricity each month than the national average in general (1,114 versus 893 kilowatt-hours, respectively). The level of savings these homeowners stand to realize from reducing their electric bills through home solar should be higher in turn.
Just note that partnering with a sustainability-minded real estate agent is of the utmost importance where home solar is concerned, especially for Phoenix area homeowners. “This is a market where there are still a lot of misconceptions about how things work with home solar, how the investment is financed, and how it connects to value down the line,” Green says. “As a matter of fact, this is something I find myself fielding questions about all the time from clients as well as other REALTORS.”
Related Post: Solar Energy: How to Get Started, Confidently
5. Don’t Sleep on Home Performance Certification
If properly marketed, Pearl Certified homes have been found to sell for a 5% premium on average, but “if properly marketed” is a fairly critical caveat to keep in mind.
What does that sort of marketing look like or entail for Phoenix metro area homeowners who want to translate home performance improvements into enhanced resale value? Taking full advantage of the certification report itself is a big part of the answer.
Why? For starters, certifications like the ones Pearl issues ensure that your investments in home performance upgrades are thoroughly documented; they can also attest to the quality of their installation and validate the performance enhancements they deliver. At the same time, they serve to heighten visibility into these upgrades in the eyes of appraisers, real estate agents, brokers, and others in the real estate ecosystem, critically connecting the dots between investments in your home’s performance and its increasing resale value on the market.
Green underscored the importance of this last point. “Having the right documentation, including benchmarking and numbers to back you up, is so important when you’re dealing with a real estate transaction and want to secure the right market value for your home,” she said.
At present, unfortunately, she thinks many of the more subtle home performance features that should be particularly noteworthy to Phoenix area buyers — say, water-saving washing machines and dishwashers, or high-efficiency shower heads and sprinkler systems — wind up being omitted from real estate databases or going unseen during the appraisal process, with the result that they aren’t appropriately marketed to buyers as part of the sales process. Certification helps reduce that risk.
Last, but certainly not least, obtaining third-party certification is also a requirement for any homeowner looking to take advantage of the IRA’s Homeowner Managing Energy Savings (HOMES) rebate program, which amounts to $4.3 billion in sustainability-related savings opportunities. So you shouldn’t overlook this step, regardless of where you are in your home performance upgrade journey at present. It’s definitely something to wrap up before listing your home in such a competitive market.
Related Post: “A Model for What Anyone Can Accomplish”: Jan Green’s Homeowner Story
Key Takeaways for Phoenix Area Homeowners
Investing in home performance improvements while buyers are hesitating is a high-value play for Phoenix area homeowners today. And as a quick recap, you should start with the following:
Assess and upgrade your building’s shell.
Convert to a heat pump (and document the resulting cost savings).
Invest in water-efficient appliances.
Evaluate the pros and cons of adding home solar in light of the unique value it can add for Phoenix area homeowners.
Pursue third-party certification to safeguard the value of these and other performance-enhancing investments.
What about next steps?
If you’re eager to connect with a real estate agent like Jan Green, reach out to one of the vetted professionals in our Pearl Real Estate Network. These qualified local experts cannot only help you cross the finish line when you need to, regardless of what your current plan of attack or ideal schedule might look like, while providing hands-on advice and support to ensure you secure maximum value for your home.
You can search for Pearl Real Estate Network members in our free app, Green Door. Plus you’ll get access to customized home improvement plans, our rebates and tax credits finder, contractor search, maintenance reminders, and more. Green Door can help you approach home performance improvements with far greater confidence, enhancing your home-selling journey and ultimately ensuring you see a healthy ROI at time of sale.
