2024 State of the Industry Analysis

00:00:00:23 - 00:00:24:11
Mike Collignon: The end of another year. That's right. Only 27 days left in 2024. And while this is a month film, very memorable holidays and observations. Today is more of a symbolic one. It's the International Day of Banks. And while that might seem like a weird mention on this webinar, I feel that you can take Greenville and Media's cognition data to the bank.

00:00:24:14 - 00:00:49:02
Mike Collignon: See what I did there? Yeah. All right. But here to give us a 2024 market review and a 2025 forecast. Is there a government? Co-Founder and CEO of Green Builder Media. You know, Sarah is a former venture capitalist who graduated cum laude from Dartmouth College. And she holds an MBA in entrepreneurship and finance from the prestigious University of Colorado.

00:00:49:03 - 00:01:15:22
Mike Collignon: She has established a reputation as a visionary, thought leader and passionate advocate for sustainability, and she works closely with a diverse group of stakeholders in the building industry to develop impactful, long term green strategies that are simultaneously sustainable and profitable. In our sponsors, well, they would like to save you some bank. For instance, Powershift by NV energy is a program that helps residential and business customers conserve energy and save money on their power bills.

00:01:15:25 - 00:01:26:15
Mike Collignon: Power shift is a one stop resource to find energy efficient products and services. For more information, please visit their website at energy.

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Mike Collignon: Shift. We also have DuPont Performance Building Solutions, who is global innovation leader in the building and construction industry. They provide products and materials for all six sides of the building envelope. By developing solutions, excuse me. By developing solutions for managing the air, water and thermal performance of buildings and residences, DuPont helps their customers build efficient, resilient and durable shelters in a rapidly changing world.

00:01:54:07 - 00:02:17:02
Mike Collignon: Backed by unmatched industry insights, building knowledge and technical support, as well as world class brands that you know such as Tyvek, styrofoam and great stuff. Their products and services portfolio enables customers to focus on what they do best, no matter where and how they choose to build. Now you can submit questions for Sara today. Simply use the questions box in the go to Webinar Control panel.

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Mike Collignon: I'm going to look over those questions and pose those to her during the Q&A time that we have set aside after her presentation. Sara. Happy December.

00:02:27:06 - 00:02:47:04
Sara Gutterman: Thank you, Mike, and thank you, as always for being such a clever webinar moderator. I enjoyed your humor. I hope other folks did as well. Thank you also to Mary Kastner, our production manager, who I like to say is our wizard behind the curtain and makes it all happen. So Mary, thank you. Thank you also to everyone here in attendance.

00:02:47:04 - 00:03:14:15
Sara Gutterman: Really appreciate your time. I know that we are all exceptionally busy, especially around the holidays. So very happy to spend the next hour ish with you today. And a sincere thank you to DuPont and Powershift by and the energy for always being generous sponsors and partners and for your leadership in sustainability, which I'll talk a little bit about throughout the course of today's webinar.

00:03:14:18 - 00:03:45:14
Sara Gutterman: So I am really excited to have the opportunity to present our 2024 state of the industry analysis and report. Our state of the industry analysis takes on a little different flavor of this one. Because of economic conditions and the results of the presidential election. I'm happy to say that builders are optimistic, consumers are wary. But green building is clearly an unstoppable force.

00:03:45:14 - 00:04:15:03
Sara Gutterman: So I'll talk about all those factors. And certainly despite persistently high housing costs, inflation and mortgage rates, the housing market remains strong. Production builders are growing even larger, gaining market share and reporting healthy profits even as they adopt more rigorous green building practices and building professionals of all kinds. Consumers, manufacturers and other stakeholders are all playing a pivotal role in the decarbonization of homes and buildings.

00:04:15:03 - 00:04:38:25
Sara Gutterman: So let's dive in and let's start with just a general industry outlook, and let's start with interest rates. I think that we're going to see interest rates fluctuate, but it's projected that they'll dip below 6% by mid 2025 because of Federal Reserve policy and a slowing economy. And so those lower mortgage rates and interest rates will boost home sales.

00:04:38:27 - 00:05:16:25
Sara Gutterman: We also are seeing that as rates decrease existing home sales are opening up, diminishing the lock in effect, which is a good thing because it will facilitate more growth in the housing market. We don't anticipate that it's actually going to affect new home sales that much, really because of pent up demand. So our builders plan on increasing their starts in 2025 over 2024 by somewhere in the 3 to 5% range.

00:05:16:28 - 00:05:46:27
Sara Gutterman: And so we're going to expecting to see a projected 3 to 5% growth in single family starts. We do know that land development costs are partly due to delays in entitlements and zoning and plan approval, and we actually project that home buyer demand is going to increase faster than lot supply can expand. So that will actually have a positive impact on the new home sales market.

00:05:46:27 - 00:06:19:18
Sara Gutterman: And it also means that when we have a strong land market, that indicates that housing prices won't drop considerably, since land really comprises about 20 to 50% of final home prices, we will see that labor shortages are going to persist. Labor shortages have actually decreased from about 400,000 jobs in 2023 that were kind of lacking to about 250,000 in 2024.

00:06:19:21 - 00:06:51:23
Sara Gutterman: So labor is still short, costs are still high, but it's not a critical limiting factor anymore. But again, it is still a persistent challenge. So and that's really because the industry continues to age out faster than it's bringing in new talent, whether those are younger individuals or really at any age. And so it means that we do need to still continue to put financial and human resources into education, recruitment and just general investment.

00:06:51:26 - 00:07:20:09
Sara Gutterman: We are seeing, especially this holiday season, that consumer spending patterns, not patterns. I see I have a typo on the slide, forgive me, but patterns have remained steady, which is actually in contrast to consumer perception of the economy, which we saw very much during the presidential election, where consumers say that they think the economy is bad, but they're still spending.

00:07:20:11 - 00:07:45:24
Sara Gutterman: And we have some data on how they're reeling in costs, but yet they are still spending on a variety of things, including, again, this has been a record holiday season. Now let's talk about the green building outlook, because green building, regardless of what happens at a federal level, and I know a lot of building professionals are asking questions about what is indeed going to happen in federal level.

00:07:45:24 - 00:08:20:08
Sara Gutterman: And I do think that we can expect to see rollbacks with respect to environmental protection regulations. Certain types of codes and emissions requirements, although certainly in the transportation space, we're actually seeing the automotive companies ask the new administration not to roll back emissions requirements for transportation because they want the security of actually having those regulations in place. And so we may see that in other sectors, perhaps in the building sector as well.

00:08:20:11 - 00:09:05:02
Sara Gutterman: However, with that said, most green building progress, whether that is regulations or codes or just advancement in general, happens at a local municipal and a state level, and there are powerful forces at play that are going to ensure continued momentum within the green building segment. So let's talk about a few of those. First and foremost, it is my thesis that the next five years will actually prove to be incredibly active with respect to carbon related and emissions and efficiency related codes and policies and regulations at that local and municipal and even state level.

00:09:05:02 - 00:09:30:09
Sara Gutterman: And that's really because there are many states and cities that have set aggressive targets for emissions reductions, carbon reductions by 2030 and 2050. But let's talk about 2030 just for now, which again, I think is going to drive the next five years to be very active. So think about cities like Aspen and Burlington, Madison, San Francisco and Santa Monica.

00:09:30:14 - 00:10:08:21
Sara Gutterman: These cities have set net zero emissions targets by 2030. So 100% emissions. And then we have other major municipalities like New York City, Los Angeles, San Diego, Washington DC, Boston, Seattle and Houston who have set aggressive 30 to 40% emissions reductions, even up to 50% by 2030. And so those cities are largely relying on energy efficiency improvements, electrification of transportation and built environment, adoption of renewable energy in order to reach their goals.

00:10:08:21 - 00:11:03:23
Sara Gutterman: And as we're inching closer to 2030. I mean, we're already at 2025. So 2030, for all practical purposes, is like tomorrow we're going to see again, I believe we're going to see an explosion of codes and regulations and policies that are going to lead to the rapid decarbonization of homes and buildings and transportation, which will drive increased demand in a very short time frame for high performance and sustainable products that are already growing in demand, whether those are heat pump technologies, HVAC, water heaters, induction cooktops, dryers, high efficiency windows and doors, insulation, lighting appliances, as well as solar plus storage, demand, side energy management systems, smart electrical panels, etc. because green most green building codes

00:11:03:23 - 00:11:59:25
Sara Gutterman: and regulations and policies are developed and enforced at the municipality in the state level, I also think we're going to see an increase in tailored approaches that really address the unique environmental, economic and social needs of specific regions and municipalities and communities. And, you know, city and states really are taking charge. And we've seen this for a decade, regardless of, you know, maybe even a couple of decades, regardless of who's in the white House, regardless of what the policies and practices are of any administration, where those cities and states really set the standards for, again, emissions reductions, energy efficiency, electrification, water conservation, sustainable materials resiliency and indoor air quality to reduce the environmental impact of

00:11:59:25 - 00:12:48:18
Sara Gutterman: new and existing homes and buildings. And so this localized control empowers municipalities to respond to local climate challenges, whether that's water scarcity or extreme temperatures, super storms, wildfires, etc.. Now, the next dynamic that is really powerful is that energy efficiency has basically become a transactional value proposition. Energy efficiency saves builders and consumers money. So we're seeing from a builder perspective that a growing number of production builders, both national and regional production builders, are figuring out how to construct homes that are Energy Star or Zero Energy Ready Homes certified so that they can take advantage of the 45 L tax rebates and incentives.

00:12:48:21 - 00:13:20:10
Sara Gutterman: And so even with increased investments for high performance products like HPC systems, water heaters, appliances, insulation, windows and doors, builders are actually finding ways to make money by tapping into these incentives. And then, of course, from a homeowner and home buyer standpoint, high efficiency home type of homes, especially those with demand side energy management systems, solar and storage just yields lower monthly utility bills and higher resale value.

00:13:20:10 - 00:13:59:14
Sara Gutterman: It's very transactional. We've also hit a milestone whereby solar and wind, and in some markets, hydro are now cheaper than fossil fuels in many regions, and solar plus storage is certainly cost advantageous for homeowners when you figure in ongoing utility bills, but also the independence and resiliency factors so that those motors can actually just keep their homes powered during a grid outage or some kind of a major climate event.

00:13:59:21 - 00:14:43:22
Sara Gutterman: And, you know, it's interesting because the cost of solar power is dropped by about 80% and wind has become increasingly affordable due to large and more efficient turbines. So at a utility scale. But then now again, also on a community or even in a house by house scale, renewables have become less expensive than fossil fuels. We're also seeing that climate commitments are continuing to being to to be driven forward as aggressively as ever by mayors and governors and individuals who understand the economic, environmental and social benefits of climate action, as well as the grave risks of climate inaction.

00:14:43:22 - 00:15:21:05
Sara Gutterman: And so, you know, certainly we're seeing in cities across our country and even across the globe are continuing to set aggressive emissions targets and then implement strategies to reach those targets. And those mayors and governors and individuals aren't alone. Businesses are certainly stepping up, understanding that sustainability is, you know, kind of now a moral duty, but also a strategic advantage that really helps to drive brand loyalty and enhance reputation and mitigate risk and sure of supply chain challenges.

00:15:21:11 - 00:15:50:07
Sara Gutterman: And certainly at an individual level, people are increasingly adopting sustainable practices in their homes and their daily lives by reducing waste, conserving energy, choosing eco friendly products, and so public support for green building and sustainability and climate action has never been higher. So that's all very encouraging. For now, let's look at the builder outlook. Generally speaking, as I mentioned, builders are optimistic.

00:15:50:07 - 00:16:19:10
Sara Gutterman: So builders have a positive sentiment. According to our 2024 state of the industry survey and analysis. And so while they recognize and home prices and mortgage rates remain high, feeling very real affordability concerns, they certainly claim that low existing home inventory, cooling inflation, a robust jobs market and solid housing fundamentals give them confidence that the housing market will remain strong.

00:16:19:10 - 00:16:58:06
Sara Gutterman: And so they report that they're addressing affordability challenges by standardizing their options to streamline costs. They are continuing to buy down mortgage rates for home buyers and building smaller homes at lower price points in secondary. And it's now over 75% of our building respondents feel optimistic about the long term prospects of the housing market. About 85% report able finances and access funding, and they point to a solid backlog that they believe will carry them into 2025 and beyond.

00:16:58:09 - 00:17:37:28
Sara Gutterman: Now, while builders are still struggling with persistent labor shortages and some are struggling with outdated codes and zoning in they in 2024, they are generally less impacted by things like material shortages, high material costs, high mortgage rates and challenges. Accessing financing this year with when compared to 2023, they're also just struggling less financially this year when compared to 2023.

00:17:37:28 - 00:18:16:11
Sara Gutterman: So you can see here that while more builders report, about 40% say that they are curbing spending in just general business growth. You can also see with the dark purple in 2024 versus the lighter purple in 2023, that they are curbing, spending less in areas like staffing and vehicles, training and education. We saw in 2023 that a lot of builders had to cut back on sustainability upgrades because of the economic environment, and you can see that that's that's fallen from about 42% to about 10%.

00:18:16:11 - 00:18:53:04
Sara Gutterman: So again, builders are just generally more economically stable this year with respect to last year and are not cutting back as much as they did last year on those sustainability efforts. Now, we can see here when we ask our builders of their reducing home prices, that about 85% are reducing home prices still by about 1 to 3%, but about 15% are reducing those prices by 4 to 6%, and none are reducing their prices by seven or more percent.

00:18:53:04 - 00:19:29:08
Sara Gutterman: So again, generally speaking, better financial outlook than than last year when we asked about inflation and high interest rates and how much those have caused builders to cut back on monthly building spenders in 2023, about 40% of builders claim that they had to just, you know, cut back dramatically. But again, this year, the majority of builders report that they had to cut back on monthly spending.

00:19:29:09 - 00:19:57:22
Sara Gutterman: You know, you can see either not at all or less than 10%. So that is a better outlook than in 2023. What we also have seen is that builders are fairly bullish about the economy. You can see over 60% believe that the economy is getting better, and less than 10% believe that conditions are worsening. And that's about a that's flipped from 2023.

00:19:57:24 - 00:20:36:14
Sara Gutterman: It was really the opposite when we asked that same question last year. We can see that across the board. When we ask our builders if they're home buyers and their clients are willing to pay more upfront or sustainability upgrades if those upgrades will lower their ongoing cost of homeownership over time. And you can see again, across the board, builders say that their buyers are willing to invest in energy efficiency, resiliency, healthy home electrification, water conservation, solar plus storage, and smart home upgrades.

00:20:36:16 - 00:21:23:02
Sara Gutterman: And these percentages are higher than this same question when we asked it last year. So the the amount the number of builders reporting that their home buyers will invest in sustainability upgrades is increasing year. We also see that there are higher demands. There's a higher demand for energy efficient windows and doors, heat pumps, efficient lighting and again, kind of across the board with a few kind of nominal exceptions energy efficiency, insulation demand for that has gone down slightly in smart home systems and controls and sustainable paints and finishes gone down slightly again.

00:21:23:02 - 00:21:57:06
Sara Gutterman: But we're still tweaking at the margins in those in those areas. So in general, our builders tell us that there is increased demand in all of these sustainability product areas, for the most part this year over last year. And when when we ask about how consumer demand just in general has changed again, pretty much across the board, builders are reporting that there is increased demand for energy efficient homes, healthy homes, resilient homes, a little bit lower on the solar powered homes.

00:21:57:08 - 00:22:26:10
Sara Gutterman: But again, electric electrified homes, smaller homes, larger homes is about the same. But that's pretty low on the priority list. And then interestingly, we did see a drop in general for connected homes. And to be quite honest with you, this is fresh data. And so I really haven't analyzed or anecdotally found out why builders are reporting that there is less interest this year in connected homes than in previous years.

00:22:26:12 - 00:22:55:12
Sara Gutterman: So we'll try to find out some more data, and I'll write a blog about that one soon. Now let's shift over to the consumer outlook. Consumers are less optimistic this year than builders. They're certainly feeling the pinch of inflation, high home prices, and elevated interest rates. And a recent study conducted by the Harvard Joint Center for housing revealed that a record number of households are cost burdened.

00:22:55:12 - 00:23:30:03
Sara Gutterman: So an all time high of 42.9 million households spent more than 30% of their income on housing costs, and that's about 850,000 more than the previous year. About two, 21.5 million households spend more than 50% of their income on housing, and that's another all time high. And that represents about a quarter, 25% of all homeowners. And there's also all time highs in renter market.

00:23:30:03 - 00:24:05:15
Sara Gutterman: So about 22.6 million renters are cost burden which is up about 22. Excuse me 2.2 million since about since 2019. So again consumers are feeling the pinch. They're spending a lot of money on housing costs. And unlike builders, about 60% of consumers think that the economy is getting worse, which is about 15% more than last year. And in 2023, Gen Z were the most optimistic about the economy, believing that the economy was getting better.

00:24:05:15 - 00:24:30:29
Sara Gutterman: However, in 2020, for their perspective, as you can see here on the chart on the right shifted dramatically, and now they're actually the most pessimistic generation about the state of the economy. Now, consumers report that they have had to curb spending kind of, again across the board in areas like entertainment, dining out, travel, groceries, household goods, goods and apparel.

00:24:30:29 - 00:25:05:04
Sara Gutterman: And that's just, generally speaking, month over month this year. With that said, as I mentioned earlier, the holiday season, we've seen kind of historically high expenditures on everything from electronics to apparel to just household goods. So, you know, we're kind of watching to see if that's an indicator that consumers are feeling better about the economy or if that's kind of a blip on the radar because of the holiday season.

00:25:05:04 - 00:25:42:07
Sara Gutterman: And they've been saving up to spend and certainly to take advantage of things like Black Friday sales and holiday sales. Now, more consumers have had to cut back on household spending this year with respect to 2023. So you can see that, you know, this year between 21 to 30% and you know, more than 31%, those responses are higher this year, whereas, you know, fewer have cut back, you know, kind of 20% and under.

00:25:42:07 - 00:26:00:03
Sara Gutterman: So again, we are seeing that those consumers are reporting that they are having problems affording daily expenses, travel expenses, utility bills and even home renovations.

00:26:00:05 - 00:26:42:07
Sara Gutterman: Now, the median monthly cost for homeowners increased about 6% to about $1,327 this year, so overall costs for homeowners have increased nearly 20% since 2019, while incomes have only increased by about 16%. So that's one reason why homeowners are having trouble affording things like daily expenses. And it's really the same for renters. Incomes rose about 19% between 2019 and 2023, while rents increased by about 29% to about $1,403.

00:26:42:07 - 00:27:09:25
Sara Gutterman: But if you look at, you know, kind of average monthly costs for renting versus buying right now, it does pay. It makes more sense to to own than to rent, just given average median own ownership versus a mortgage rate versus rental costs. We do see that more consumers have to dip into their savings and charge more on their credit cards.

00:27:09:25 - 00:27:33:10
Sara Gutterman: This year, they're stopping looking for a new home, and they're waiting on purchasing vehicles more this year than last year. But fewer consumers are taking those from banks, borrowing money from friends or family, or taking a second job or a side hustle to cover Spence's. Now, with all of that said, consumer interest in sustainable homes continues to grow.

00:27:33:11 - 00:28:05:07
Sara Gutterman: That is just, you know, continuing to grow year over year. In fact, I would argue that financial concerns and conditions are actually driving increased awareness about operating and maintenance costs, and more frequent and intense climate events are amplifying awareness about the benefits of resilient. And so those two dynamics are really translating into enhanced demand for these types of sustainability and upgrades.

00:28:05:07 - 00:28:39:15
Sara Gutterman: So this is the same question that we asked builders. But when we ask consumers, obviously we just ask if they are willing to pay for sustainability upgrades, if those upgrades will lower their ongoing cost of homeownership over time. And the two lines here are not 2023 versus 2024, but rather the brighter blue line shows millennials and Gen Z willingness to invest in these sustainability upgrades, whereas the darker blue line shows Boomers and Excerpts willingness to invest in these upgrades over time.

00:28:39:15 - 00:29:20:11
Sara Gutterman: So you can see that there's a much higher interest from younger generations in these sustainability upgrades, which is important given that these younger generations now command over 50% of all home purchase applications and are certainly the influencers in the housing sector. Now, when we break out kind of generationally, how each generation feels about owning a new home, affordability certainly remains an important factor for younger generations, many of whom report that they would buy a new home or just a home today.

00:29:20:11 - 00:30:05:29
Sara Gutterman: If they could afford something in a good neighborhood, or that they have been forced to stop searching because they just simply can't afford to purchase a home at this time, whereas Boomers and Xers report that they own a home and they're happy homes. Another telling indicator that the economy is top of mind for consumers is that historically, and we've been asking this question for many years, historically, when we ask what the top global risk of highest concern is, millennials and Gen Z have pretty much every year said that the failure to mitigate and adapt to climate change is their number one global risk of highest concern.

00:30:05:29 - 00:30:34:28
Sara Gutterman: However, this year survey respondents, especially millennials and Gen Zs but again across the board, indicated that economic instability is their top concern this year with the failure to mitigate and adapt to climate change following behind that terrorist activity. Physical attacks and gun violence also rose in the rankings for Boomers and Xers, more so than we've seen in years.

00:30:35:01 - 00:31:05:02
Sara Gutterman: Now, this is a really, really interesting chart to me. We've been asking this question again for over a decade, you know, in terms of understanding how home buyers and consumers and different generations value their homes. So we ask if they're more focused on upfront costs and lowest, lower, lowest price per square foot versus long term value and operational costs.

00:31:05:02 - 00:31:42:10
Sara Gutterman: And for the first year ever, all four generations responded that when purchasing a home, they focus more on long term value and operating costs than upfront price and cost per square foot. We've seen this fluctuate over the years. Baby boomers actually, believe it or not, have generally for the last many years, been more focused on operational costs. And that could potentially be because, you know, they are on fixed incomes and they need to figure out ways to decrease ongoing monthly costs when getting into a home.

00:31:42:11 - 00:32:05:07
Sara Gutterman: And they have a little bit more home equity when they buy the home. So they can translate that from home to home if they're upgrading or downsizing, whereas younger generations tend to be a little bit more focused on that upfront cost because they're earlier in their careers, maybe they don't have as much cash or equity to put into a down payment.

00:32:05:07 - 00:32:56:18
Sara Gutterman: However, millennials, when they got into the home buying market and started reaching their home buying potential even before the pandemic, they started telling us that long term value and operating costs were was it or at least as important as upfront cost? But now again, more and more, all four generations are shifting more towards placing the long term value and operating costs over just that, just looking at lowest front cost when purchasing home, which means that things like energy efficiency, electrification, solar storage play more of a role today in purchase decisions and home purchasing decisions than they have ever before.

00:32:56:21 - 00:33:32:21
Sara Gutterman: Now let's look at the road ahead with some 2025 projections. I know I offered a few at the beginning of the webinar, but you know, we do anticipate that mortgage rates are going to stabilize around 6% this in 2025, and that there will be ongoing job growth. We will see those gradual improvements that I mentioned in housing inventory levels, particularly existing home inventory levels, that is going to again, diminish that lock in effect and fully spur the home buying market.

00:33:32:23 - 00:34:20:23
Sara Gutterman: You know, even more, even though, again, we don't anticipate that that existing home inventory opening impacting new home sales just because of that pent up demand, we also, you know, expect gradual improvements in just the economy, economic conditions in general, which will enhance buyer confidence and market home market participation. So we anticipate about 4.3 million existing home sales, which is a 9% increase over 2024, going up even further in 2026, we expect about a 2.6 increase in home values, which is similar to that to to this year 2020 for about a 3.5% appreciation in home prices.

00:34:20:25 - 00:34:47:12
Sara Gutterman: The dynamics that are really going to impact the market in general, and particularly the building and the housing sector, though, had less to do with, I think, you know, lowering mortgage rates and, you know, increased consumer confidence and more to do with what I like to call the transformation trifecta. And that is the combination of our environmental, social and financial.

00:34:47:15 - 00:35:22:14
Sara Gutterman: So from an environmental standpoint, we have already hit 1.5 degrees warming. We're going to two degrees warming in the next 12 months. Some say 6 to 8 months. And the reason why that's important is not so much that climate scientists say that if we go over two degrees warming, then all of our ecosystems are going to collapse. They're not necessarily saying that, but rather the issue is that the models that they use to predict what's going to happen, basically, they fail over 2% warming.

00:35:22:14 - 00:35:48:07
Sara Gutterman: They can't actually use and apply their climate models. So we are just going blind into the future if we go over that two degrees threshold. And that's why that two degrees warming threshold was set from the beginning. We're also seeing exploding levels of climate anxiety, particularly with younger generations. 77% of millennials and Gen Z consider the future to be frightening.

00:35:48:09 - 00:36:44:01
Sara Gutterman: 56% think that humanity is doomed because of climate change. It's very high levels of concern. And so, you know, we have to really provide solutions that address that very real social reality of climate anxiety. And then the third piece, of course, is our financial reality, whereby, you know, we now have investors and lenders and supply chain partners who firmly believe that companies, whether those are builders or other types of building professionals, manufacturers who have strong corporate sustainability strategies, ESG policies that purchase carbon offsets are actually lower risk than those who do not have a strong strategies and policies in place, and therefore, those investors and lenders are willing to provide better interest rates or more

00:36:44:01 - 00:37:20:28
Sara Gutterman: favorable loans. So we've hit that milestone. And again, regardless of what happens at a federal level, there may be some strange pushback to, you know, against ESG or corporate sustainability at a federal level. But the the market dynamics are already in play there, undeniable. And certainly the private sector is leading with these sustainability concerns, mostly to help mitigate risk, shore up those supply chain channels and partnerships, and just in general, reduce financial risk.

00:37:21:01 - 00:37:49:24
Sara Gutterman: Now, I talked about these high levels of eco anxiety among younger generations, and I just wanted to show this chart that that kind of corroborates the fact that those younger generations have become influencers in the housing market. You can see the blue line. This is home purchase applications. You can see the blue line shows the millennial level of home purchase applications.

00:37:49:24 - 00:38:18:07
Sara Gutterman: And that's staying pretty consistent a little bit over 50%. Whereas Gen Xers, which is the red line, and boomers, which is the yellow line or decreasing. But the line to really pay attention to here is that little orange line, which is Gen Z, that's going to grow like a hockey stick in the next handful of years. So when you combine Millennials and Gen Z together again, well over, you know, 60% of the market in 2024 and beyond.

00:38:18:10 - 00:38:50:05
Sara Gutterman: So clearly we have to provide homes and products for those homes and solutions and messaging that addresses their specific climate concerns. I also want to talk about the changing regulatory landscape, which is a really important driving factor for what's going to happen with respect to the decarbonization of the built environment. So we are already starting to see climate risk disclosure requirements.

00:38:50:08 - 00:39:22:01
Sara Gutterman: The state of California passed two climate laws last year that are going to start requiring companies that hit $1 billion in revenue, that threshold to start reporting on scope one, two and three, climate risks, climate risk. I'll talk about that in a minute and place. You don't know what that is, but what that means is that it's not just these companies that hit that billion dollars revenue threshold, but all of the companies in their supply chain and in their value chain.

00:39:22:01 - 00:39:49:19
Sara Gutterman: So their lenders and bankers and attorneys and contractors and anyone that provides services to those large companies is going to have to start engaging in this scope. One, two and three disclosure. We've also, of course, seen that the SEC is now going to start requiring scope one and two disclosure. They didn't adopt scope three because scope three is hard.

00:39:49:21 - 00:40:20:07
Sara Gutterman: And but that's really going to impact the large publicly traded production builders as well as manufacturers and other companies throughout the value chain in the building sector. We also saw earlier this year, the Department of Energy come out with a zero emissions building definition that's usually a precursor for Ansi standards and baselines for codes and regulations and policies in the building sector, particularly in the residential sector.

00:40:20:10 - 00:40:53:11
Sara Gutterman: The Biden administration came out with a set of voluntary carbon offset guidelines. That's really putting some guardrails around high quality carbon offsets. That's going to help us get to the last mile of decarbonization. We'll talk more about that in a minute. We're seeing codes and mandates already put in place. So this July, for example, California put in place a code that is that is requiring commercial buildings, large commercial buildings to report on scope one, two and three emissions.

00:40:53:13 - 00:41:31:06
Sara Gutterman: But that's going to also translate into the residential sector. So we're starting to see certain municipalities like San Francisco and Los Angeles, Santa Barbara, Santa Monica start thinking about emissions requirements, disclosure requirements, as well as reduction requirements at the residential level. And then we'll use Boston as another example. They've also implemented codes that not only require emissions reporting, but are also going to start requiring builders and developers come in with net zero carbon plans at the point of getting permits.

00:41:31:06 - 00:42:12:27
Sara Gutterman: So again, all of these dynamics are impacting the building industry. In case you don't know, scope one emissions or direct emissions that are burned by a company, scope two or indirect emissions that are purchased, say, from a utility. And scope three is basically all other emissions. And so as you can imagine, scope three can be anywhere from 80 to 95% of the emissions from the company because it includes buildings and manufacturing and transportation and employee travel, whether that's commuting or plane travel, it's product use considerations and end of life considerations.

00:42:12:27 - 00:42:38:19
Sara Gutterman: So again, it's it's big to get your arms around. But it's a really important part of the equation that what I like to say is if you're if you're a company in California or if you do business with any company in California, you have to start thinking about this. If you're a if you're a privately if you're a publicly traded company, you're probably already starting to think about this because of the SEC requirements.

00:42:38:19 - 00:43:07:06
Sara Gutterman: But if you're none of the above, you still need to start thinking about this because someone that you do business with is going to start requiring that your business reports on either scope one and two, or eventually scope three. So the train has left the station, and we all need to be thinking about this with respect to homes and buildings, the conversation has decidedly shifted from net zero energy to net zero carbon.

00:43:07:08 - 00:43:30:27
Sara Gutterman: When we talk about emissions from homes and buildings, there's two components to that. The first is embodied carbon. And so the way I like to explain that is embodied carbon represents everything from when the first material is extracted for any product that goes into a home. Let's just talk about homes for now, up until the day that home is sold or really occupied.

00:43:30:28 - 00:44:11:24
Sara Gutterman: So everything that goes into material extraction, transportation, manufacturing of products, packaging, more transportation, installation, waste management, you know, when you take away the packaging all the way up until you know, again that home is occupied, then that's where operational carbon takes over. So operational carbon is emitted once a home is up and running and in use. So it's interesting because we're working really closely now with builders and manufacturers to understand not just how to measure, but also how to reduce embodied and operational carbon.

00:44:11:24 - 00:44:37:06
Sara Gutterman: And with respect to a home, concrete and steel, some kinds of insulation and solar actually are the biggest contributors, with, of course, concrete and steel being the largest contributors to embodied. So like solar as an example increases embodied carbon but it decreases operational carbon. So there are some trade offs even with the increase in embodied carbon, solar makes sense.

00:44:37:06 - 00:45:03:01
Sara Gutterman: But I think that, you know, there's a lot of things happening right now with respect to understanding how to measure and calculate and reduce embodied and operational carbon. Fortunately, we are going to see an Ansi standard 1550 come out at some point next year in 2025. That is going to streamline the measurement of embodied carbon in residential projects.

00:45:03:04 - 00:45:24:01
Sara Gutterman: And so I think that's going to really get us a long way, because I think we all know that Ansi standards are the thing that codes and regulations are based on, generally speaking. So I think there's going to be a lot of widespread adoption of the calculation and measurement of embodied carbon by those municipalities, cities and states that we talked about earlier.

00:45:24:01 - 00:45:58:01
Sara Gutterman: They're trying to aggressively hit carbon emissions reductions targets once that Ansi standard comes out. So in order to reduce embodied and operational carbon and get to a net zero carbon built environment, there's a couple key steps. The first is performance addressing performance. And you do that through sustainable design and construction practices. So climate responsive design, building science, green building, the meticulous specification of low carbon products from low carbon companies.

00:45:58:03 - 00:46:27:25
Sara Gutterman: So looking at corporate sustainability and ESG and emissions reduction scope one, two and three practices of companies, but then also looking beyond the companies to things like environmental product declarations and other certifications that those companies have, and then carbon offsets to get us to that last month. And so we're really seeing a lot of adoption of those sustainable design, building science and construction best practices with emissions reductions in mind.

00:46:27:26 - 00:47:06:06
Sara Gutterman: Right now, we're seeing a lot more interest today than ever in things like passive heating and cooling and climate responsive design strategies. Certainly, electrification enhancing energy efficiency, health and wellness is still of paramount importance. It was certainly the belle of the ball during Covid. It continues to to be important in that conversation around decarbonization because I think, as we all know, if we make our homes too tight and we don't have proper ventilation and air exchange, that's bad for for comfort and for indoor air quality.

00:47:06:08 - 00:47:47:15
Sara Gutterman: In this journey towards decarbonization, we are again seeing that shifting valuation metric. I showed you the data where all four generations are now starting to look more at long term value and costs of homeownership, which has shifted that value away from just looking at lowest upfront costs. And again, that is bolstered by access to rebates and incentives by both builders as well as homeowners, largely from the Inflation Reduction Act, but also rebates and incentives from municipalities, from states and from utilities.

00:47:47:18 - 00:48:25:05
Sara Gutterman: Now, beyond addressing performance, as I mentioned, the next piece, critical Piece in Decarbonizing the Built Environment, is that meticulous specification of low carbon products from low carbon companies. This is particularly important if you think about the fact that there's about 20,000 product inputs that go into a home, about 450 SKUs, which is a type of product. So it is of paramount importance that we do really start to specify products with environmental product declarations or some equivalent of certification, and that we look at corporate sustainability practices of companies.

00:48:25:05 - 00:48:53:16
Sara Gutterman: And there's a lot of examples out there. I'm going to give a shout out to DuPont, which is one of our sponsors today. So DuPont, just as one example, they had a goal to reduce their carbon emissions, particularly in scope one and two, by 50% by 2030 and 25% in scope three emissions by 2030. In 2023, they actually exceeded their targets.

00:48:53:16 - 00:49:32:08
Sara Gutterman: They reached a 58% reduction in scope one and two emissions from their 2019 levels, and a 39% reduction in scope three emissions from 2020 levels, and their power now by about 60% renewables. So they hit their climate goals seven years early, and they are still on track to get to net zero emissions by 2050. So that's an example of a company that's, you know, walking the walk and not just talking about it.

00:49:32:12 - 00:50:00:20
Sara Gutterman: Another notable thing that DuPont did was they reformulated their styrofoam brand XPS insulation to reduce the embodied carbon from that product by about 94%. So that is substantial. So I think that's, you know, again, those are good examples of, you know, company and product related initiative that really reduced the, you know, is helping to to drive for the department.

00:50:00:22 - 00:50:28:20
Sara Gutterman: Now I just don't have a couple of slides about environmental product declarations because we are seeing an incredible surge in the specification of environmental product declarations. So about 85% of our builder audience tells us that they currently specify products with ePDM. And another 95% of those who are not currently specifying products with EPD say that they are going to do so within the next year or a couple of years.

00:50:28:23 - 00:51:15:13
Sara Gutterman: Builders are specifying products with to know the product roadmap, to comply with regulations and codes, and also to meet consumer demand. Now, what's interesting here is knowing that product roadmap that's actually pulling into scope three, reporting, whether they realize it or not, understanding and then being able to pull through data for their own disclosures and reports. That's really kind of what that knowing the product roadmap is comprised of, so that those builders understand the impacts and the emissions of the products that they're using so that they can include them in their own disclosures and reporting for investors and for lenders.

00:51:15:15 - 00:51:45:24
Sara Gutterman: About 65% of our builders tell us that they are seeing increased demand from their home buyers for products with environmental product declarations. And then another 20% say that while their home buyers might not necessarily be familiar with EPD specifically, they are asking for product certifications to verify sustainability needs. Now, the last piece I just want to touch on very briefly to get us to a decarbonize built environment is carbon offset.

00:51:45:24 - 00:52:17:05
Sara Gutterman: And the real truth is we just don't have enough low carbon products and low carbon building and transportation and waste management and installation practices to get to 100% decarbonize built environment. Today, we can't build totally net zero carbon homes and buildings given where we are today. So we have to deploy carbon offsets in order to get to net zero carbon.

00:52:17:05 - 00:52:53:03
Sara Gutterman: So if you're not familiar with them, one carbon offset is basically the equivalent of taking one ton of carbon out of the air. There's lots of different types of carbon offset projects today, ranging from nature based projects which are, say, forest conservation or mangrove replanting projects all the way through to highly technology based, you know, very sophisticated projects like the ones that you're throughout their capture, which take fans and pull carbon out of the air and put it into the ground.

00:52:53:05 - 00:53:21:17
Sara Gutterman: There's a big difference between high and low quality carbon offsets. High quality projects do things like address additionality. So they they the projects wouldn't have been done otherwise. They also eliminate double accounting, meaning they do not plant the tree and then sell an offset from that tree planting 10 or 100 or 1000 times. They do insure permanent carbon removal.

00:53:21:17 - 00:53:54:28
Sara Gutterman: They provide robust and timely data. They have third party validation, and they have well-defined pricing and benefits and results. And so I have a whole other webinar that I have given recently in junction with our partner, Mark Chen, the CEO of Senate, who's our partner in this initiative. But Green Builder Media is so, so adamant that we have to have offsets to reach that last mile of decarbonization that we actually got into this market to streamline access to high quality carbon offsets.

00:53:54:28 - 00:54:17:22
Sara Gutterman: And again, I won't go into too much detail here. I have my email on the next slide. You can email me if you want to learn more about carbon offsets, but whether you buy them from us or not, please just buy them from wherever you see fit and wherever is most appropriate for you, because they're just so important for helping us meet our climate goals.

00:54:17:24 - 00:54:42:23
Sara Gutterman: So with that, we've just got a few minutes left. Mike, I'm going to kick you back over to you to see if we have any questions from the audience. But again, thank you so much, Mike and Mary. Thank you everyone in attendance. Thanks to N.V. energy and DuPont for your generous support. And I hope that that today's webinar and the information I presented was helpful in terms of understanding where we are today.

00:54:42:25 - 00:55:13:18
Sara Gutterman: As I mentioned, builders seem to be feeling pretty good. Consumers still are a little wary, particularly because of economic conditions, but it is absolutely undeniable that the building industry, the housing sector in particular, has already shifted towards enhanced sustainability. That's not going away. Even in the next administration. The market dynamics are strong, fierce even, and, you know, are only going to continue to to grow into property.

00:55:13:21 - 00:55:19:19
Sara Gutterman: So again, thank you so much. And Mike, let me know if there are any questions.

00:55:19:21 - 00:55:38:22
Mike Collignon: That's right. If there are any questions please send them in to the questions box. Sarah, we do have a couple if you're okay with that. The first is from our friend Kim Shanahan. He wanted to know, when does water finally get included in operational carbon?

00:55:38:24 - 00:55:48:19
Sara Gutterman: Thank you. Nice to just hear your name. And also it's a great question.

00:55:48:21 - 00:56:12:14
Sara Gutterman: We are we're getting closer. And I think that with the advocacy from people like you, and certainly we'll do our best to continue to beat the drum. Water will continue to be included in the measurement of operational carbon. I have to be honest with you. And to say, I don't know what kind of an impact water will have on that 1550 Ansi standard.

00:56:12:14 - 00:56:55:24
Sara Gutterman: I know that there will be some water considerations. However, Kim, you know, given that energy, water nexus and that it takes a lot of energy to produce water, you know, clearly it makes sense to address water conservation and really water availability and quality issues more than we have moving forward. What I think is going to happen, Kim, and you know this, since you're in Santa Fe, which has probably the most rigorous water related regulations and policies, as well as the highest priced water and the lowest per capita water use in the country.

00:56:55:27 - 00:57:24:17
Sara Gutterman: So there's kind of that, that indirect or the direct but reverse correlation of high water prices, but low water use, partly just because you guys don't have much water. So it's out of necessity. I think what we're going to see is more progress on a very localized and market based scale based on demand. And clearly, you know, we are starting to see that in water parched areas in the western half of the country.

00:57:24:20 - 00:57:50:14
Sara Gutterman: We are weak. And I am in Colorado, as you know. So I'm including our state in this. But, you know, we're just getting hotter and drier. Obviously, in the eastern half of the country, there's a very different consideration in terms of too much water. There is kind of a tale of two two countries where the western half of the country is dealing with not enough water, or the eastern half is dealing with too much water.

00:57:50:20 - 00:58:11:06
Sara Gutterman: But even still, you know, you saw and this was several years ago, but, you know, in the state of Georgia, almost seeing it just it was days away from getting into some pretty severe litigation with its surrounding states, with its neighbor states over water supply. But then it rained. And, you know, things got better. And we avoided the water.

00:58:11:14 - 00:58:35:24
Sara Gutterman: The initial water wars here in the US. But no doubt, you know, they're coming. And, you know, we definitely need more innovative water solutions, whether those are atmospheric generators or community scale water harvesting generation, purification technologies as well as policy.

00:58:35:26 - 00:58:52:24
Mike Collignon: So I had I had a question or two for you, sir, if you don't mind. You were talking about the SEC climate risk disclosure requirements. Do you see those going away in 2025?

00:58:52:27 - 00:59:19:13
Sara Gutterman: In 2025. So that's kind of a silver bullet question. I don't think that they will. Because I think that again, there are enough people. It's kind of like what I mentioned with the example in the transportation sector, where the automotive companies have actually asked the administration not to roll back emissions targets because they need the security of consistent policy.

00:59:19:13 - 00:59:51:09
Sara Gutterman: And I think that that may be the case, that even if the next administration tries to roll back some of these climate risk disclosure requirements, that there's going to be some pushback and a request by companies to say, hey, look, you know, if we're going to have to start doing this at a state level for California, for Massachusetts, for New York, for Colorado, for other progressive states that are looking at climate risk disclosure requirements.

00:59:51:12 - 01:00:35:21
Sara Gutterman: And a lot of multinational companies are already having to disclose climate risks, like, for example, in the EU, the European Union requires scope one, two and three reporting as well. I think that we're going to just start seeing these companies say, look, let's just have some consistency. I know certainly, you know, a lot of our friends who work in the solar sector, they've just been on this wild ride over the last 20 years, really, but especially over the last 10 to 15 years where, you know, there's tariffs, there's no tariffs, there's incentives, there's no incentives, you know, so they're just pleading for some consistency, whatever that is.

01:00:35:24 - 01:01:00:25
Sara Gutterman: So I think that there are arguments, you know for sure there's a possibility that you know the scope wanting to another climate risk disclosure requirements that are implemented by the SEC that that beyond scope and two also address material climate risks, which is a little bit different. I won't go into details, but I think there may be some efforts to roll those back.

01:01:00:28 - 01:01:11:02
Sara Gutterman: I'm not sure that that will actually happen again, just because I feel like the wheels are already in motion.

01:01:11:05 - 01:01:37:07
Mike Collignon: We have a question from Garrett. Sticking with the future administration, is there any concern in the industry, the building industry, about the supply chain of energy efficiency and decarbonization products? So we're talking about things like heat pumps and solar panels and batteries and chips that come primarily from China. Given the large potential increase in tariffs over the next four years, sir.

01:01:37:10 - 01:02:28:13
Sara Gutterman: Absolutely. You know, I think that there are lots of angles with respect to this conversation. So some of our friends and colleagues that, you know, are leaders and executives at US based companies, you know, see the possibility of, you know, good boost in demand for their products. However, in a lot of these sectors, whether it's, you know, heat pump technology or even efficient appliances and certainly solar, there's not actually enough capacity here in the US to meet the demand that we're going to have in the next year or three years, five years, as the housing market continues to grow.

01:02:28:13 - 01:02:36:13
Sara Gutterman: So I think anyone that wants to throttle international.

01:02:36:15 - 01:03:32:05
Sara Gutterman: Trade through tariffs or other punitive policies and practices should think about the fact that that we're going to create a whole other set of problems. Again, just with respect to basic market dynamics and fundamental supply and demand. You know, if we put, again, these, these tariffs and other punitive policies in place. So, you know, I think that, you know, we'll see how aggressive those tariffs are if they get put in place at all, or if it's more of a of a political leverage point, as we've seen with threats to put tariffs in place for Mexico and Canada, those may be more political leverage points.

01:03:32:08 - 01:03:42:19
Sara Gutterman: And again, I'm not I'm not trying to make a political statement here. I'm just trying to look from a pure economic standpoint. But yes, there are certainly concerns.

01:03:42:22 - 01:03:59:01
Mike Collignon: Yeah. All right. Well I don't see any other questions. So I want to thank Sarah for sharing the her wonderful insights, the cognition smart data that was that was always a treat to do this webinar every year. So thank you sir.

01:03:59:03 - 01:04:19:03
Sara Gutterman: Mike. Thank you again. Thanks also to Mary and and the energy and hunt. And I hope everyone has very festive holidays and take care and we'll see everybody again in I'll see everybody again I think in February for our annual generational marketing.

01:04:19:05 - 01:04:46:29
Mike Collignon: Yes, I definitely want to thank our audience two for attending today asking wonderful questions. Powershift by is a great partner of ours, DuPont as well. That concludes our webinar series for 2024. Thank you so much for joining us today. Throughout the year, whenever you've been able to, we really, really do appreciate it. We'll be back in January, though, to kick off another year of insightful and compelling content on behalf of everybody that Sarah just named.

01:04:47:00 - 01:04:52:09
Mike Collignon: Thank you very much. Have a wonderful holiday season and an inspired New Year. Take care everyone.