An Analysis of the Effects of Residential Photovoltaic Energy Systems on Home Sales Prices in California
An increasing number of homes with existing photovoltaic (PV) energy systems have sold in the U.S., yet relatively little research exists that estimates the marginal impacts of those PV systems on home sales prices. A clearer understanding of these effects might influence the decisions of homeowners considering installing PV on their home or selling their home with PV already installed, of home buyers considering purchasing a home with PV already installed, and of new home builders considering installing PV on their production homes. This research analyzes a large dataset of California homes that sold from 2000 through mid-2009 with PV installed. Across a large number of hedonic and repeat sales model specifications and robustness tests, the analysis finds strong evidence that California homes with PV systems have sold for a premium over comparable homes without PV systems. The effects range, on average, from approximately $3.9 to $6.4 per installed watt (DC) of PV, with most coalescing near $5.5/watt, which corresponds to a home sales price premium of approximately $17,000 for a relatively new 3,100 watt PV system (the average size of PV systems in the study). These average sales price premiums appear to be comparable to the investment that homeowners have made to install PV systems in California, which from 2001 through 2009 averaged approximately $5/watt (DC), and homeowners with PV also benefit from electricity cost savings after PV system installation and prior to home sale. When expressed as a ratio of the sales price premium to estimated annual electricity cost savings associated with PV, an average ratio of 14:1 to 22:1 can be calculated; these results are consistent with those of the more-extensive existing literature on the impact of energy efficiency (and energy cost savings more generally) on home sales prices. The analysis also finds - as expected - that sales price premiums decline as PV systems age. Additionally, when the data are split between new and existing homes, a large disparity in premiums is discovered: the research finds that new homes with PV in California have demonstrated average premiums of $2.3-2.6/watt, while the average premium for existing homes with PV has been more than $6/watt. One of several possible reasons for the lower premium for new homes is that new home builders may also gain value from PV as a market differentiator, and have therefore often tended to sell PV as a standard (as opposed to an optional) product on their homes and perhaps been willing to accept a lower premium in return for faster sales velocity. Further research is warranted in this area, as well as a number of other areas that are highlighted.