Sticker Shock: Energy Bills Spur Home Buyer Remorse

Adjusting to a big mortgage payment is hard enough, but many buyers aren’t ready for the other costs of homeownership, especially big utility bills.

Whether it’s because of icy winter winds or blistering summer heat, homeowners pay a lot to condition the climate inside their box. New homeowners, especially, have been hammered in recent months with escalating utility bills.

A recent survey by Clever , a real estate agent network, found that the average homeowner paid $17,459 annually in 2023 for additional expenses beyond their mortgage. That includes $4,975 for utilities.

Focus on HVAC and Water Heating

Heating and air conditioning constitute the largest energy expenses in most homes, accounting for 30% to 40% of the total bill. 

Dan Hnatkovskyy, CEO and co-founder of NewHomesMate , a marketplace for new construction homes, says they need to zero in on the biggest power guzzlers first.

“If you want to save money on your bills, then improvements in heating and air conditioning will have the biggest impact,” he says. Depending on where you live, heating your water and paying for heat and air conditioning can contribute to  about 75% of the average household’s energy bill, says DR Richardson, co-founder of Elephant Energy, a company that aims to provide an electrification roadmap for homeowners.

While homeowners may be shocked at the size of their utility bills, most are aware of the value of making energy efficient improvements. 

Green Builder’s COGNITION Smart Data surveys found a higher level of awareness or concern regarding energy sustainability in homes, such as building or renovating a home to net zero energy standards and converting to an all-electric home, compared to other sustainability solutions. The data found that homeowners are willing to spend an average of $2,000 to $2,500 for energy efficient upgrades, including for a high-performance HVAC system.

While that may be plenty of money for some upgrades, it may not be enough for a major purchase. There are, however, inexpensive and DIY upgrades that can reduce your utility bills.

“Be sure to look into rebates and incentives locally,” Richardson says,  “as well as the tax credits currently available from the Inflation Reduction Act (IRA), which offer thousands of dollars in savings to offset the upfront cost of this work.” 

Rewiring America has a calculator to estimate IRA savings, or you can check rebates by Zip code for Energy Star certified products. DSIRE offers a complete Database of State Incentives for Renewables and Efficiency. You can also check this Energy.Gov list with links to every state energy program to look for energy audits and incentive programs.

Assess, then Address

First, you may want to do a DIY energy audit or schedule one with your local utility company to identify issues in your home. If you choose a professional energy audit, make sure it includes a blower door test.

“If your home is leaky –meaning, not properly sealed and insulated– you can about double your monthly spend on heating/cooling,” Richardson says. “This is because heating or cooling (and hard-earned dollars) are escaping your home.”

In addition, old equipment can also be a driver of high energy bills, he says.

“For example, an old, inefficient boiler will cost you about two to three times what a new heat pump will cost you to operate, and an old gas furnace or AC will cost you about 50% more,” Richardson says. “While there is much conversation and hype about LED light bulbs and hyper-efficient appliances, at the end of the day these choices have a relatively much smaller impact on your energy bills compared to your HVAC systems.”

DIY Energy Upgrades to Downgrade Your Bills

You probably have already taken some basic steps such as pushing up your thermostat a few degrees in summer and wearing warm clothes in winter so you can tolerate a lower temperature to save on your energy costs, but a few other options include:

• Get a programmable thermostat. These cost less than $100, and make it easier to set your preferences, Hnatkovskyy says.
• Unplug. Get smart power strips that shut off automatically or even a basic power strip that makes it easy to turn it on or off to reduce phantom power bleed on electronics such as televisions.
• Change your shower head. Lower your water heating costs with a low-flow, high-aeration shower head, Hnatkovskyy suggests.
• Heat just what you need. Consider installing a ductless mini-split  or a ducted mini-split in the room you spend most of your time in, such as a home office. The unit can heat and cool that space for one-third the cost of an electric heater.
• Try window wraps. “In older homes with single-pane windows, sometimes a more aggressive method makes sense,” Hnatkovskyy says. “If you have several windows in a room, and especially if it’s on the windy side of your house, you can buy window insulation film, which looks a lot like fancy kitchen plastic wrap, and tape it over the window and windowsill to provide an extra layer of insulation. Your coldest room can be your coziest with just 15 minutes of work.”
• Get new blinds. On the slightly more expensive side, installing insulated blinds can help increase efficiency by regulating your home’s temperature, Richardson suggests. Motorized versions are available that work with a remote or a smartphone app that can be programmed.
• Add weatherization. Add insulation and air sealing for one of the highest ROI upgrades, Richardson says. Reducing the leakiness of your home lowers expenses. Weatherstripping, which involves sealing these gaps with insulating material, is a super simple and affordable solution you can install yourself, he says.

The most common places for household air leaks, according to Energy Star, are:

• Behind Kneewalls
• Attic Hatch
• Wiring Holes
• Plumbing Vent
• Open Soffit (the box that hides the recessed lights)
• Recessed Light
• Furnace Flue or Duct Chaseway (the hollow box or wall feature that hides ducts)
• Basement Rim Joists (where the foundation meets the wood framing)
• Windows and Doors

“We like to think about insulation like a sweater, maintaining your desired indoor temperatures by limiting heat flow through walls, ceilings and floors, especially in attics and crawl spaces, which tend to be the most drafty,” Richardson says. “On the other hand, air sealing acts like a windbreaker, preventing unwanted airflow through gaps and contributing to a more stable indoor climate while easing the strain on HVAC systems.”

Homes with weatherization, which costs $1,000 to $5,000, report about 10% to 20% lower heating and cooling usage compared to non-weatherized homes, Richardson says.

Deeper Pockets = Bigger Benefits

If you want to see even bigger energy savings, more comprehensive upgrades may be in order.

Upgraded Insulation. “Adding or upgrading your ceiling insulation can be a time-consuming project, but it's well within the reach of most homeowners,” Hnatkovskyy says. “Depending on how your attic is laid out, either rolls of insulation or blow-in insulation might make more sense. You can rent blow-in machines from your local home improvement store and within a weekend you can significantly improve your energy efficiency.”

This doesn’t have to be a DIY proposition, however. A small home may cost under $2,000 for a full attic insulation overhaul. In the South, some pest companies will blow in treated borate cellulose, not only raising the R-value of your attic insulation, but also preemptively controlling for insects.

Hybrid Heat Pump Water Heating. At a slightly higher price point, a heat pump water heater is also a great investment that saves you money.

“They’re less expensive to operate than their fossil-fueled counterparts and have a much lower carbon footprint, too,” Richardson says. “In our experience, homeowners can typically save over $300 per year by switching to a heat pump water heater, which will run you about $6,000 to $7,000 before rebates and incentives.”

Air Source Heat Pumps for HVAC.The “appliance of the decade,” according to Richardson, is a super-efficient air source heat pump.

“Unlike traditional HVAC systems, they transfer heat rather than generate it, which is what allows them to be two to three times more efficient than fossil-fueled options,” he says. “During summer, they pull heat out of your home, and in winter, they reverse the process, bringing it inside so they can replace both your furnace and your air conditioner.”

High-quality, cold climate heat pumps generally cost anywhere from $20,000 to $30,000, Richardson estimates, before incentives.

“The good news is that these costs can be dramatically offset by rebates and incentives – in some cases, by up to 50%,” he says.

Another option with a big impact is to install rooftop solar panels to generate renewable energy.

“We typically recommend installing solar panels after you electrify other pieces of your home – like your HVAC system,” Richardson says. “This is because you’ll already have an accurate picture of your energy needs, and then can ensure you get an array that meets your home’s full electricity demands.”

Whatever your budget can accommodate, don’t wait, he says.

“For larger installations like heat pumps and heat pump water heaters, proactive replacement is key,” Richardson says. “Keep track of how old your HVAC equipment is and when it’s nearing retirement age. If you wait to replace it until you have an emergency on your hands, it’s likely that you’ll get stuck with ‘what’s on the truck,’ which is almost always another gas furnace.”

The idea of waiting for more incentives or a better time can be tempting, but the best time to make these upgrades is before you need to, he says.

Publisher’s Note: This content is made possible by our Today’s Homeowner Campaign Sponsors: Whirlpool. Whirlpool takes sustainability seriously, in both their products and their operations. Learn more about building and buying homes that are more affordable and less resource intensive.