“Does solar increase the value of a home?” Its a common question we realtors receive nowadays. Another common question we receive is “Does a swimming pool increase the value of a home?”
For both questions, I have been answering “Probably not in general, but some buyers may find a value in it”. A solar system can be great for some people who are willing to take on new technology and enjoy the savings, but it can be a “hassle” and “an extra thing to worry about” for some people. A swimming pool can be great for a family with children, but a maintenance nightmare for some people who don’t want to swim often.
Today, I met a solar panel consultant at our office meeting. He specializes in educating consumers of Southern California Edison about solar systems. On his website, he is siting a scientific study regarding the effect of solar systems on the sales price of the homes. Please read below.
“The best and most up-to-date study in this area is the latest one by the University of California Lawrence Lab, published at the end of 2015.* The most relevant part of the study for SCE customers focused on 13 homes in San Diego.
It shows that PV systems increased the sales price of the homes they were installed on by between $1.46 and $7.53 per watt (STC DC rated), with an average of $4.31 per watt. The systems ranged in age between 6 months old and 11.4 years old, and in size between 1.43 kW (tiny) to 6.30 kW (a little above average). Even eliminating the outliers in the study, such as new systems, very old systems, and tiny systems, the average remained about the same: $4.41 added value per STC watt.
The system our example homeowners are considering costs $17,000 net and is of size 4,619 STC watts. At a value of $4.41 per watt, per the study, that would add $20,371 in value to their house, once it was installed.
That means they would buy the system for $17,000 and, if they sold their house in a few years (the average age of PV systems in the study is 3.6 years old), they’d be able to sell it for $20,371 more than if they didn’t have a PV system. They would make a $3,371 profit on the deal, not counting the electricity savings they’d reap in the meantime.”
According to this website, solar systems do increase the value of homes slightly more than the installation cost.
I was still skeptical if an average buyer is willing to pay $20,000 more for a house only because the house has a solar system. So I looked at the original study.
It turned out that the added value (determined by a group of appraisers) differs greatly between homes. For some homes, the added value or “”the total PV premium” is only $5000. This is negligible for a $450-500K homes, and much lower than the installation cost. The study also states that the homes with solar panels took slightly more time to sell than homes without solar panels.
Does solar increase home value? My answer for now is still “Probably not….” What do you think?
*Sandra Adomatis and Ben Hoen, “Appraising Into the Sun: Six-State Solar Home Paired-Sale Analysis, An analysis for Appraisers and Other Valuation Professionals” Lawrence Berkeley National Laboratory, November 12, 2015.