Understanding the Solar Home price premium: Electricity generation and “Green” social status

This study uses a large sample of homes in the San Diego area and Sacramento, California area to provide some of the first capitalization estimates of the sales value of homes with solar panels relative to comparable homes without solar panels. Although the residential solar home market continues to grow, there is little direct evidence on the market capitalization effect. Using both hedonics and a repeat sales index approach we find that solar panels are capitalized at roughly a 3.5% premium. This premium is larger in communities with a greater share of college graduates and of registered Prius hybrid vehicles. ► Solar panels are capitalized into California home prices. ► The capitalization is roughly a 3.5% premium. ► This premium is larger in communities with a greater share of college graduates. ► This premium is larger in communities with more registered Prius hybrid vehicles. ► Environmentalists are more likely to buy solar homes.