Affordability and lack of supply are two of the biggest issues in homebuilding today. These challenges are even more pronounced in California, with only small portions of the populations able to afford the median price of new homes, compared to the national average of approximately 50%:
% Households That Can Afford New Home Median-Price
With affordability already an issue, adding in $10,000 to the purchase price of a home for solar panels will inevitably cause some headaches for builders. For example, some consumers will see that, all else equal, the price spread between new and existing homes is higher and opt for the cheaper option. Others may decide to spend less on options and upgrades to offset the $10,000.
Costs vs. Savings
The focus, however, should really be on the monthly payment. We calculated that the change in the mortgage payment is just under $40.00 per month when considering median home prices and current mortgage rates. The $40.00 difference is the same whether one is buying a $200,000 home or $1.5 million, making lower-cost areas are more vulnerable. Here’s the cost breakout by select regions:
- California average: 2.0% increase in the monthly payment
- Central Valley: 3.0%+
- Coastal Southern California: Roughly 1.0%
- Bay Area markets: <1.0% difference
The 2020 mandate looks costly on the surface, especially for consumers who don’t place a high value on the technology, but adding solar panels is estimated to be a net gain for households (see the graphic below). Furthermore, unlike some regulatory fees that raise home prices without an obvious benefit, consumers can enjoy the utility of the solar panels.