Besides saving you money, reducing your energy costs, and giving you renewable energy, solar panels increase home value by 3-4%.
The team at Lawrence Berkeley National Laboratory spent 11 years researching how photovoltaic (PV) systems added value to houses. Their research entitled “Selling into the Sun: Price Premium Analysis of a Multi-State Dataset of Solar Homes” was groundbreaking. Put simply, a lot of homebuyers were opting for a house with a PV system installed. Furthermore, customers were more than willing to pay the average (avg) premium of $15,000 for a 3.6 kW system. The findings suggested that PV systems boosted a house’s quality, resulting in more money for the seller. How? In this article, we’ll guide you through some questions you may have regarding how solar panels increase home value.
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The research consists of the following terms, each of which is defined below for your convenience.
Photovoltaic (PV) – Refers to the conversion of light into electricity. PV installations make up the average solar power system added on a house.
Premiums – Perhaps more commonly known, a premium is an added sum or increase to a price. A little bit later, we’ll dig deeper into how premiums are a huge point in the research.
Hedonic Model – This is a method that estimates the value of an item. For instance, the item in our case would be a residence with or without PV installations. The hedonic model observes both internal and external factors that might affect the pricing of the house.
Host-Owned vs Third-Party Owned – Put simply, your solar power system is host-owned if it’s under your name. If the system is installed through a lease or PPA, you are renting it (it’s third-party owned).
PV Homes vs Non-PV Homes – These are properties that either have PV installations or don’t.
Incentives – Benefits of solar energy in the form of payments for your investments. Namely, federal; state; and local incentives.
Depreciation – Overtime, the value of a good reduces because of various factors.
Researching how solar panels increase home value
The Lab looked at rising sales of PV homes to estimate how much solar panels increase home value.
The decrease in PV installation costs and increase in financing options lead to a rise of homes with solar power systems. Moreover, PV homes were being sold at a notable rate prior to the analysis. The researchers at Berkeley Labs responded to the increase in sales by analyzing 22,822 homes (3,957 of which were PV homes). In the end, they confirmed their hunch was true—PV adds value to both California and non-California homes.
PV home premiums
Home premiums were an interesting variable because they could have prevented homebuyers from paying for a house with PV. However, homebuyers considered factors explored below as reason enough to make the purchase.
A house sports numerous, cost-affecting qualities that buyers and sellers recognize when they agree on a price. Subsequently, a premium is created as a response to the established value. And the hedonic model equates the sales price to the home and site, the neighborhood, and market characteristics. In other words. tack on a solar panel system and you’ve raised the value of your house.
In this graph, you’ll notice that there was a 3,659% increase in PV home sales between the year 2002-2013. The Lab found that the average price of a PV home was $473,373 during these years. This price includes premiums for which customers were “consistently willing to pay”. Moreover, non-PV homes had a mean sale price of 456,378. Did you notice the price drop compared to the average PV home? Homebuyers were consistently paying $16,995 more for a house with solar. And despite the market’s fluctuation, homebuyers were still paying premiums because they wanted a home with renewable energy sources. Plus, depreciation factors like wear and tear were offset by federal, state, and local incentives.
Long story short, solar panels are dependable and profitable additions to homes within and outside of California.
How do solar panels increase home value?
A house with solar panels attracts buyers looking to save money. Having photovoltaic technologies promises energy efficiency. Here’s something you might already know: energy saving installations guarantee a lowered monthly electricity bill. That financial benefit slaps a big ribbon on a PV-home, regardless of premium pricing.
Solar is here to stay and grow
The team at Berkeley is looking to expand their research with a focus on third-party homes. After all, because interest in PV homes is skyrocketing, researchers need to learn as much as possible to stay informed.
To remain up-to-date, houses are almost requiring solar power systems as an energy source to reduce fossil fuel dependence. The solar industry is here to help you join that future. Click here to book your free consultation and find out how much you can gain with solar.