If you’re like many Americans, you’ve probably enjoyed watching a home renovation show or two over the years and thought about what projects you want to tackle when it comes to your own home. As the housing market remains sluggish due to record-high mortgage rates, now is a smart time to make some upgrades.
In a tight real estate market like we’re seeing today, if you’re trying to sell your home you’ll face a lot more competition than during the pre-pandemic years. There’s low inventory across the country, home prices haven’t dropped in meaningful ways, and although the Federal Reserve didn’t raise interest rates at its latest meeting, mortgage rates are still hovering around 7%.
How can you stand out if you’re trying to sell your home in this type of economic environment? It’s true that a new kitchen or updated bathroom can make your house a more attractive option for homebuyers, but another, more financially beneficial home improvement project is adding solar panels to your roof. Installing a solar energy system is an investment in addition to a home improvement, whereas a kitchen or new home office is not. That’s because compared to redoing a kitchen or bathroom, solar panels immediately cut your electric bill out of your life, providing instant savings.
If you spend $40,000 on a kitchen renovation, for example, you’re likely to see your return in the form of a higher sale price for your house, but you won’t have eliminated any bills from your budget, and you may be stuck paying off a construction loan or home equity loan if you can’t afford to pay for the renovations in cash. Homes with complete kitchen remodels see a 75% cost recovery, according to the National Association of Realtors, but solar panels are a 100% cost recovery opportunity because they cut out your electric bill completely, and then continue to save you that money over decades. Plus, homes with solar panels also net higher sale prices, selling for 4% more on average than similar homes without them, according to Zillow.
“Redoing your kitchen is a wonderful thing for your daily life,” said David Bridge, president of Great Sky Solar, based in Arlington, Mass. “But as far as what to do with your money in an environment like this, invest in an actual investment, which is the only thing that solar is. Solar is nothing else but an investment, and it's a ridiculously good investment.”
Even if you take out a solar loan to pay for your solar panel installation, you’re still in a better financial position because you’ve gotten rid of your electric bill, and the monthly loan payment you have in place of it will most likely be lower than what you were paying for electricity. Most homeowners also pay off their solar loans faster than the length of the loan term – the average EnergySage customer breaks even on their solar investment in eight to nine years. Which is another reason you don’t have to be intimidated by current higher interest rates when it comes to solar loans.
“High interest rates mean you’ll pay more per month for solar than you would’ve with a similar loan a year ago, but if you’re like most solar shoppers, you’ll pay down the loan long before it’s due, making it less important to minimize your monthly payments,” said Spencer Fields, director of insights at EnergySage.
You’ll also receive tax benefits for going solar that aren’t available to you for a home renovation. If you buy solar panels you’re eligible for the federal solar tax credit, also known as the investment tax credit (ITC), which allows you to claim 30% of your solar energy system cost as a credit on your taxes. The average solar panel system costs anywhere from $20,000 - $30,000 before taxes and incentives, which means you’ll save thousands of dollars on your installation cost.
While it’s true that if you use a home equity loan to pay for either a solar system or a home remodeling project, the interest on that loan is tax deductible, which benefits you no matter what type of home improvement project you choose – but there are no significant tax credits available for home remodeling, so you likely won’t save as much if you go that route.
Plus, solar panels don’t involve choosing a new kitchen design or updating your cabinet colors. You don’t have to worry about remodeling decisions such as picking the right finishes for hardware and hoping that what you choose appeals to the widest range of buyers. Solar panels are a modern resource that are attractive to buyers no matter what brand or type of panels you go with. They also have the added benefit of appealing to buyers who care about sustainability and environmentally friendly upgrades, which is a growing share of homebuyers.
You can speak with one of our Energy Advisors for free to answer any questions you might have about the process of going solar. The EnergySage Marketplace gives you the opportunity to receive bids from numerous installers competing for your business so you can feel confident you’re making a sound financial decision, as well as working with a trusted local installer.
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