Do Solar Panels Increase Home Value? Understanding Solar Home Sales

Discover whether solar panels will increase the value of your house.

Photovoltaic panels
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Within the past decade, more and more prospective buyers are willing to pay a premium for homes with photovoltaic (PV) panels. The energy cost savings associated with solar, as well as the growing interest in environmental sustainability, are among the reasons why.

But the size of that premium—and potential energy savings generated by a home solar system—varies considerably by location. To understand how solar panels increase home value, there are several factors that must be considered.

How Much Do Solar Panels Increase Home Value?

Interest in residential solar has grown precipitously in recent years. According to a 2019 Pew Research Center survey, 46% of homeowners said they had given serious consideration to installing home solar panels in the past year. 

In a 2015 study, researchers from the Lawrence Berkeley National Laboratory deployed seven appraisers to assess how much value a PV panel system added to single-family homes in six different states. They found that homebuyers were willing to pay $15,000 more on average for a home that had a system with a typical size of 3.6 kilowatts. 

Similarly, an analysis by the online real estate marketplace Zillow found that between March 2018 and March 2019, homes with solar energy systems in several in-demand real estate markets around the country typically sold for 4.1% more than similar homes without solar power—about $9,274, on average. 

Location Matters

The premium varied significantly according to the market. In the Zillow analysis, homes in Riverside, California, and Orlando Florida enjoyed a premium of approximately $10,000 and $11,000, respectively. That premium more than doubled in hot markets like Los Angeles ($23,295) and New York ($23,989), while San Francisco homes with PV enjoyed a whopping $41,658 premium over other homes. 

Sunny Arizona may offer the biggest bang for its buck: A 2017 study of a sampling of homes there found that electricity-generating solar panels provide an average premium of approximately $45,000, or a full 15% of the median home value.

On the other hand, homeowners in states with few financial or regulatory incentives for solar may find the potential premium diminished.

Factors That Influence Home Value

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Houses with solar panels for sale, backdropped by the volcano Pico del Teide in Tenerife, Spain. EyesWideOpen / Getty Images

Why are many prospective homebuyers willing to pay a considerable premium for homes with pre-installed solar panels? There’s no single explanation. Certainly as residential solar becomes more common, buyers increasingly view it as an upgrade—a home improvement likely to generate revenue in the long run. 

Energy Savings

Solar energy is now the cheapest form of electricity in most of the world. Homeowners can save a bundle on their electricity bill over the lifetime of their solar system. Exactly how one can save depends on location, electricity consumption, and other factors, but many prospective buyers know that a solar-powered home with a recently installed system will often be more than worth the premium they pay for it in the long run. Simply by visiting the Utility Rate Database, they can find out how much the utility company will reimburse them for sending back to the grid the excess energy generated by solar panels.

In many parts of the United States, there are other potential financial incentives associated with generating solar energy. If you live in an area that offers solar renewable energy certificates (SRECs), for example, you may be able to earn additional money by selling these to your utility. Prices vary, but in some states, SRECs can be worth over $300 each. Many homeowners generate enough solar energy to acquire several SRECs per year. The Database of State Incentives for Renewables & Efficiency provides a breakdown of state incentives for renewables and energy efficiency.

No Installation Required

The most daunting aspect of going solar at home is usually the startup costs and paperwork, so buying a home with PV panels already installed and generating cheap electricity for years, if not decades, to come is an attractive selling point for many buyers. 

The inverters necessary to convert the solar energy into electricity will last a decade or more, while solar panels are typically guaranteed to last 25 years and will often last longer though with reduced efficiency. Installed panels are also easy to maintain; rain cleans the panels, and snow melts away quickly. 

Environmental Values

For many prospective buyers, purchasing a solar home is a win-win: They save on electricity costs and have the satisfaction of knowing that they’re helping to reduce greenhouse gas emissions and air pollution. 

According to the National Renewable Energy Laboratory, the average U.S. household can lower its annual carbon dioxide emissions significantly by switching to solar-generated electricity. But that’s not all: Emissions of sulfur dioxide and nitrogen oxides, which can lead to respiratory illnesses and cardiovascular disease, would fall by 80 pounds and 50 pounds a year, respectively. 

Given the financial incentives, homeowners looking to increase their home value—and save money on their electricity costs in the meantime—may want to consider the potential benefits of installing a solar system.

Other Considerations

While rapidly gaining in popularity, solar won’t be attractive to every prospective homebuyer. Some buyers may not like the appearance of solar panels on a house, may have concerns about repairs and maintenance, or may hesitate about making a long-term commitment to solar. 

Keep in mind also that there’s a difference between a residential solar system that the homeowner owns and one that is leased. The latter might not add value to a home, and some buyers may balk at taking over a solar lease, which has credit requirements that not everyone qualifies for. 

Treehugger Tip

Local real estate agents who are knowledgeable about solar home sales can help gauge local demand for residential solar and find out what kind of premiums homes with solar systems are fetching in the market. A knowledgeable appraiser can also help identify and assess the value of a home’s green features.