Homes with solar panels sell for $14,329 more on average than homes without solar installations. How much your home value will increase depends on several important factors, including the age of your solar panels’ installation, the location of your home, the cost of electricity, and the perception of buyers.

Studies Show Solar Power Increase Home Prices

Do solar panels increase home value? Well, research definitely says solar works. Here are three important studies that show how investing in solar power can be advantageous for your sale price and property value.

LocationThe Berkeley Study

A multi-institutional team of researchers and scientists led by the U.S. Department of Energy’s Lawrence Berkeley Laboratory looked at the impact of solar investment on property values.

This study looked at 12 years of data that involved almost 23,000 homes in eight states. The Berkeley study factored in different house attributes such as bedrooms, location, and square footage.

Findings

This study found that each watt of electricity produced by solar panels added around $3 to a home’s value and sale price. And if you live in California, that value increased to $4. Considering a typical solar energy system produces 8,700 watts, this will increase your home value by $26,100.

However, it’s important to note that the answer as to how many watts you can produce will depend on factors like the efficiency and strength of your system and the number of square feet available on your roof.

The $3 to $4 increase in house value per watt is a high number because the average installed cost of solar energy during the study time was less than $4 per watt. So considering this fact, you can recoup 100 percent or more of your installation cost when you sell your home. This quality makes solar one of the best investments you can make to increase your home’s value.

The Zillow Study

Another study, the ‘Zillow Study,’ was conducted by a real-estate information company. They arrived at their results by comparing homes sold with and without solar energy systems from March 1, 2018, to February 28, 2019.

This study considered important factors such as square footage, age of the home, location, and the number of bedrooms to arrive at its conclusions.

Results

This study found that the average premium for solar energy homes was 4 percent. The National Bureau of Economic Research has also estimated the solar premium at 4 percent using a sample of homes in the San Diego area.

The Zillow study also highlighted that solar panels increase a home’s value even more in a state where house prices are high. For instance, median-valued homes in New Jersey enjoy a 9.9 percent higher appraisal or $32,281 on average. Meanwhile, median-valued homes in South Carolina are valued at 3.5 percent higher, or $5,866 on average.

 The Appraisal Journal Study

According to this study, your home value can increase by $20 for every $1 reduction in your total annual utility bill if you install solar panels. The average American home spends around $1,450 each year on electricity costs from fossil fuel. So if you install a solar energy system that covers 100 percent of your utility needs, you can enjoy a $29,000 increase in your home value.

An Example: Which House Would You Buy?

Solar Panels Increase Home ValueImagine you were looking to buy a home that is identical to other houses in the neighborhood. The only difference of all homes is one of them has a solar installation on the roof that will reduce your electricity bill by $100 per month. When you calculate the difference, you will save $1,200 per year if you purchase the solar-powered home instead of the other houses on the street. You will not only be saving electricity but also decreasing your carbon footprint.

Considering this, it would make complete sense that the home’s property value with a solar installation would have a higher price than other homes on the street.

Different Factors Involved

Solar panels installations do not just increase home value but also helps properties to sell 20 percent faster than those without one. In fact, CNBC reports that  80% of buyers look for solar panel systems and other energy efficiency upgrades when they go hunting for houses.

But to determine whether or not solar panels increase property values, you need to consider several important factors.

Age of Your Solar Panels

If you installed solar panels in 2000, they wouldn’t increase your home property value if installed in the last year. Solar modules that were just released are more efficient than their predecessors.

Also, they are more valuable when they are new. Typically, solar installations with at least two decades of use remain to increase the value of a home. Otherwise, solar panels do not have much impact on property value.

A newly purchased solar system equipped with efficient technology and a longer warranty can mean less maintenance. Homeowners with older solar panels need to factor in the depreciation value of their system. And therefore, anticipate a lower premium in their home value. Even if you sell your home, keeping your solar panels updated is a sound investment compared to other renovations.

The cost of a residential solar system is about half the price compared to 2010. Not only that, but solar energy systems have also become easier to install. All these factors will help increase your return on investment if you opt for a solar installation today.

Location

Solar panels can last up to 35 years, depending on the location of your home. Solar energy systems in places with a very active solar market will give you a higher return than less developed markets.

The utility costs differ across regions and states, as do solar panel policies like property tax exemptions. There are geographical features that can make a difference in terms of the impact of solar installations on property values.

Solar performance-based incentives in the area

Certain states and municipalities offer cash rebates and incentives for homeowners that have solar panels. So make sure to take time to research whether your state or locality offers any incentives.

For example, in addition to the tax credit, Arizona residents can also enjoy up to 25 percent reimbursement of any solar panel costs, up to $1,000. They also do not have to worry about sales tax on their system because of the solar equipment sales tax exemption and energy equipment property tax exemption.

For example, California

In California, people can also take advantage of rebate programs that pay a $0.95 per watt or $500 flat fee for solar panel systems. One example is the Rancho Mirage Energy Authority that pays homeowners a $500 rebate covering permit fees.

Another example is the Disadvantaged Communities – Single Family Solar Homes (DAC-SASH) that gives rebates to qualified homeowners that install a solar energy system.

Cost of Electricity

There are areas in the country where the average utility bill is $155. This number is higher than other areas because of the cost of natural gas, the heat, and the size of houses. Places with higher utility bills include Dallas, Honolulu, Tampa, Tallahassee, Hartford, Miami, Savannah, Jackson, and Birmingham. In these areas, having solar panels would be an advantage because homeowners can save on power.

Ownership Status

If your home has solar panels, but you lease the solar energy system rather than own it, the home resale value would not be affected much. This is because solar panels need to be part of your property. Even though you save on electricity costs, the leaser can remove the panels. As a result, this situation would not make much of a difference for your home value.

Perception of People

RecordkeepingOne of the major factors that will come into play when it comes to your home value is how potential buyers and locals in your area view homes with solar panels. Residents of sunshine states such as Florida value the benefits of solar energy, and therefore, have a more favorable impression of solar installations.

On the flip side, homebuyers in Yukon or Alaska may not be willing to pay more for a home with solar panels. The progressiveness of the local community will also play a big role in the perception of solar panels, even if you are located in a lower-light region.

However, it is important to note that most Americans generally view solar energy as a huge selling point for homes. Since electricity prices are expected to increase in the coming years, homes with solar panels can be a huge advantage when you try to sell.

Your home sale price can increase more than the actual installation cost. It is because of the green home phenomenon, which covers homes with solar installations. Since having a green home has become mainstream, people are willing to pay more money if they see your property as something that does not harm the environment.

This trend is also referred to as the “Prius effect.”

It is common with buyers in locations where support for environmental conservation is high.

About Recordkeeping

If you want to sell your home with a solar panel system, you need to have good records of the solar history for potential buyers. This will serve as proof that your solar installation was done by a reliable company and that it has proper permits.

You also want to keep a record of the warranty information. Having your old and new power bills in hand will also prove that you have saved energy thanks to your solar panels.

How Expiring Tax Rebates Can Affect Your Home Value

When you have a solar-powered home, you can qualify for the federal residential solar energy tax credit. This program reduces the amount of income tax that you owe.

26 percent tax credit was passed in December 2020 for solar systems installed between 2020 and 2022 and 22 percent for systems installed in 2022. Systems installed before December 2019 were subject to a 30 percent tax credit.

Unless Congress renews it between now and then, the federal tax rebate solar incentive for homeowners will expire after 2024. Many local rebates in different states are also set to expire.

Although this will reduce the number of solar panels installed in residential areas, it will positively impact increasing the value of your home should you already have a solar installation in place.

If you install a solar system now, you will enjoy a 26 percent rebate. But in the coming years, this benefit will disappear. Considering this, it will cost potential homeowners 26 percent more to have a solar energy system installed in their homes. This means that your solar panels will be worth more for future home buyers because they would not enjoy the same tax rebates you could get during your time of purchase.

It is important to consider that the cost of solar installations is expected to drop. But it’s unlikely for it to decrease by 30 percent in the next couple of years. This means that if you think you want to sell your house soon, your solar installation will still be a good investment.

What If You Decide Not to Sell?

If You Decide Not to SellEven if you do not sell your home, the benefits of enjoying a solar system installed can still be realized. Over the years, you can recoup the cost of your solar installation and save on power bills. In short, it can help you save money and avoid power interruptions. Not only your resale value will increase. There will also be many advantages for you if you decide to keep your home.

An Important Note

No matter what improvements you make to your home, its value will decrease over time. Whether it’s renovating your kitchen, adding a pool (with solar heating), or introducing solar panels. The kitchen will wear out, the pool will go out of style, and your solar panels will degrade over time.

When it comes to solar panels, the investment will work well beyond the warranty. It should also provide you electricity for a long time before you replace them.

The Verdict

If you want to install a solar system but you also want to move soon, there’s no reason for you not to invest. Having solar panels in your home will allow you to save on electricity bills every month.

When the time comes to sell your home, the value of your home will benefit. Also, your home may even sell faster with a solar installation in place. There’s no doubt that solar is an amazing investment for the environment and your wallet as well.

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