Do Solar Panels Increase Home Value?

Two recent economic studies indicate that homes with solar panels sell for a premium over similar homes without solar panels, allowing homeowners to recover the cost of their initial investment. Photo: Creative Commons, Copyright Sebastian Ballard

Would you pay more for a home with solar panels?

Many people already are, according to two recent economic studies that found homes with solar photovoltaic (PV) systems sell for a premium over homes without solar panels.

The National Bureau of Economic Research (NBER) released a report last month concluding that homes with solar panels sell for approximately 3 -4 percent more than their conventional counterparts – especially in areas with a large number of college graduates and registered Prius owners.

A study from the Department of Energy’s Lawrence Berkeley National Laboratory, which came out in April, discovered that solar panels boosted home prices by approximately $3.90 to $6.40 per watt or $17,000 for a 3,100-watt PV system.

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Both reports analyzed home sales in California, the largest market for PV in the U.S., with nearly 1,000 mega watts of solar capacity installed, according to the Berkeley Lab.

NBER’s economists compared statistics of homes sold in San Diego County in the 1990s and Sacramento County in the 2000s, while the Berkeley Lab reviewed home sales in the 2000s throughout California.

Both reports concluded that the sales price premium afforded by a solar array is comparable to the cost to install the system, minus the federal and state rebates, allowing the homeowner to recover their initial investment.

“This is a sizeable effect,” said Ryan Wiser, a Berkeley Lab scientist and co-author of the Lab’s study. “This research might influence the decisions of homeowners considering installing a PV system and of home buyers considering buying a home with PV already installed. Even new home builders that are contemplating PV as a component of their homes can benefit from this research.”

The Berkeley Lab’s research also found that the boosted sales price decreases as the solar array ages, likely due to the system’s decreasing efficiency and expected remaining lifespan.

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But have local real estate agents in the San Francisco Bay Area encountered a similar trend?

“My experience has been that [solar panels] do not add value…the sales price on two [homes with solar] I sold did not increase in spite of heavy marketing about the panels,” said David Bergman, Silicon Valley real estate agent with Intero Real Estate Services.

John Thompson, Intero’s executive vice president and managing officer of their Los Altos office, reported that the effect of a PV system on home price is similar to other home improvement and remodeling projects – a finding also noted by the NBER report.

“It certainly helps to have nice features in the home that add value but it does not necessarily bring dollar-for-dollar value – or more than what was spent,” Thompson said.

Thompson pointed out traditional characteristics like location, lot size, square footage, floor plan and number of bedrooms and bathrooms still guide prospective home buyers’ purchasing decisions. Solar panels are an added bonus to a home that meets the home buyer’s other criteria, but are not the determining factor in choosing a home, he said.

Just south of San Francisco, Alain Pinel real estate agent Joseph Capote has discovered that interest in solar depends on location, and in the often foggy climate of northern San Mateo County, that interest is fairly low.

“[In northern San Mateo County], the demand for solar from buyers is not that great; it’s just not on the top of [the customers’] list of ‘wants,’” he said. “The demand for green materials in the home is a bit greater. Products like [eco-friendly] sheetrock, countertops, doors and other green items in the home are higher in demand in this area.”