Solar - a Great Energy Alternative for Your Home

High-energy Darlene considers a new energy source for her home and ponders the payoff.

Delightful Darlene, who captains I-don’t-know-how-many-different tennis teams (I’m on three of them), turned to me with a question earlier this week, as our team was enjoying the well-earned post-match snacks.

“Lauren,” she said, “you’re in real estate.  Here’s a question for you.  What is the resale value of adding solar to your home?”

My answer was that it’s such a new feature that I doubt there are any hard statistics.  However, it’s a very attractive attribute to have in a home: buyers are excited about it and appreciate the savings it offers.

Darlene understood that it’s not the sort of upgrade you would do if you were planning to move any time soon.  If you wanted to get your home ready for the market, you might remodel your kitchen — you wouldn’t install solar panels.

That’s the sort of decision where you need to factor the cost and the savings and consider how many years it will take to break even.

In Hawaii, where electricity runs high and so does the sunshine, homeowners can expect  a return on their investment after six years with the help of tax incentives offered by the state.  This article explains how “with a 30 year warranty on the solar installation, that amounts to 24 years of free electricity for as long as the sun shines in Hawaii.”

But Darlene’s question intrigued me. No question there is significant value in a solar-powered home, but how much?

I recently wrote a where solar was my theme: featuring homes for sale from Alamo to Livermore that have solar-powered energy sources.  That said, even if it is a small sample for statistical purposes, there are homes with this great feature that are selling.

Sold, so far this year, I found 39 homes in Alamo, Blackhawk, Danville, Diablo, and San Ramon that have solar power.  These 39 homes averaged 47 days on the market with a median price of $1,025,000 and a median price per sq foot of $315.

How did they fare against the other homes In the 1591 that sold in these towns so far this year? Well, in that set, we have a median price of $710,000 and a median price per sq foot of $292.

But I’ll be the first to point out how meaningless these statistics really are. For example, the homes with solar power are often newer homes—which tend to sell for a higher price per sq foot. And 39 out of 1591 is only about 2% of the sales. Impossible to make a sensible judgement about value from such a drop in the bucket.

But think about it: we would probably all be thrilled to have free electricity—if we could snap our fingers and it was already installed, we’d be delighted. The only thing stopping us from installing solar panels in droves is the time and money involved. So if you were shopping for a home, and found one you liked that had solar power, there’s no doubt it would increase your excitement about the home. If you were trying to decide between two homes and one had solar power, it would be likely to tip the scales.

As Darlene contemplates adding solar panels to her home, she will do the math to figure out when she’ll have a payoff. A buyer for her home, down the road, would do something similar.  Sure they would be willing to pay more for the home if it comes with free electricity.  How much more will depend on how long they expect to stay in the home, and how much they expect their own eventual buyer to value that aspect.

Sam Clemens October 22, 2011 at 08:14 PM
Be careful of the assumptions that sales people give about future price of electricity, and the tax credits that actually apply. My experience is that u will need to believe the sales person, want to pay extra to be "green", and not mind adding debt to your balance sheetv for solar to work out.
Ron October 23, 2011 at 12:53 AM
If any house has solar, then you know the owners are idiots. Even with the ridiculously costly subsidies, solar takes at least a decade to pay off - and then you never hear about the leaking roofs from improper installation, the fly by night installers, etc etc. And I think solar panels are hideous eyesores - wouldn't want them on any house I own...
julianswartz October 23, 2011 at 06:35 AM
And see if you can swing a 15-year loan: If you took out a $250,000 30-year loan at 5.47% in 2003 and refinanced to a 15-year at 3.55% today, you'd up your monthly payment by only $145, save $94,200 in interest over the life of the loan, and pay off your mortgage seven years sooner. use only 123 Refi calculator


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