Solar Panels on a New Home: A Cost-Effectiveness Analysis

In most residences, the first impression is the one made from the outside, not the interior. Rethinking outdoor spaces is important for creating the impression that lasts the longest.

Homes with solar photovoltaic panels (PV) can appeal to some new home buyers because of reduced electric bills and a lessened environmental impact. The decision to proceed with such a major investment, however, raises a question about the return on investment.

Home Innovation Research Labs recently completed a study analyzing the cost effectiveness of rooftop solar PV across five different markets: Phoenix; Tampa, Fla; Boston; Kansas City, Mo.; and Seattle.

The analysis was performed using the System Advisory Model (SAM) – a software developed by the DOE’s National Renewable Energy Laboratory (NREL). The software models the energy performance of the solar PV array at the specific location and for a specific house configuration to accurately calculate the expected electricity production and cost-effectiveness metrics for the system using local utility tariffs.

The model evaluated a new house construction scenario, which assumed that the solar PV system was installed prior to the house sale as part of the overall equipment package. The analysis did not incorporate any financial incentives because such measures are temporary and vary greatly depending on the jurisdiction.

The analysis indicates that the following factors are the primary drivers in determining how cost effective a rooftop solar PV system is:

Local electricity price
Utility tariff for purchasing excess electricity generated at the house
Solar resource at the site and panel orientation
Installed cost of the PV panels

Electricity prices vary widely across the United States, with some of the highest rates in Hawaii and Massachusetts at 29.2 cents/kilowatt hour (kWh) and 18.5 cents/kWh, respectively, on average, compared to 8 cents/kWh on average in Seattle. In more expensive electricity markets, using solar PV will be more attractive than in markets with lower electricity prices because the site generation will partially offset the need to buy electricity from the utility.

The utility tariffs for purchasing the excess electricity generated at the house also vary widely across the country. For example, in Boston, the utility purchase price is set at nearly the retail sale price that customers are paying for electricity on their utility bills, so the consumer can sell the excess electricity generated at the site for a high price and bank the revenue. However, many utilities around the country purchase excess solar electricity at a much lower rate, making payback periods longer. The utility purchase price is a less significant factor for smaller PV systems (e.g., 3 to 5 kilowatts) that do not overproduce electricity.

The availability of solar resource also varies with the location. Among the five analyzed cities, Phoenix has the highest solar resource averaging 5.79 kWh/square meter (m2)/day, and Seattle had the lowest at 3.47 kWh/m2/day. The PV panel compass orientation is another factor that impacts the amount of generated electricity and the cost effectiveness of the system. PV systems facing south, southwest or southeast result in shorter paybacks.

The installed cost of the PV system can vary from market to market and project to project. The study evaluated a range of costs that a home buyer can expect.

Surprisingly, it’s more cost effective to install rooftop solar PV in Boston than in Phoenix or Tampa. This outcome is the result of Boston’s high local electricity pricing and favorable purchasing tariffs that outweigh the difference in the available solar resource and other factors. The table below summarizes key results for the five cities, and the two example charts show simple payback (first cost divided by first year savings) for Phoenix and Boston. Depending on the configuration and the installed cost of the PV system, the simple payback in Phoenix varies between 15 years and more than 40 years. In Boston, the simple payback varies between 12 and 21 years. More detailed results, including other cost-effectiveness metrics, can be found in the full report.

In summary, the cost effectiveness of roof-mounted solar PV panels depends on a range of factors that are location specific (utility tariff, solar resource) and project specific (system cost, panel orientation). For the same location, the simple payback can range by a factor of two or more and may be outside the life expectancy of the solar PV panels if all factors cannot be optimized and assuming no financial incentives were used to offset the total system cost.

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Gen Z, Millennial Home Buyers Willing to Compromise on Square Footage

By Jami Clevenger • April 2, 2025

As the home building industry celebrates New Homes Month in April, new research shows that more than half of Gen Z (53%) and millennials (52%) are progressively more open to having a smaller home with higher-quality products and amenities versus a larger home with fewer amenities. “Builders are responding to home buyer preferences and constructing homes with less square footage, which are generally more affordable and easier to maintain,” said Austin Hall. The median home size dropped from 2,200 square feet in 2023 to 2,150 square feet in 2024, the lowest in 15 years, after holding strong at 2,300 square feet from 2019-2022, according to the National Association of Home Builders. The same thing is happening to median lot sizes, which has dropped about 1,000 square feet in the last 15 years to 8,400 square feet. There are several consistently popular features among home buyers across all generations, such as a great room, laundry room and garage storage. Other top amenities and design options include drinking water filtration, special storage racks for wine/spices in the kitchen and both a shower stall and a tub in the primary bath. “New home buyers enjoy the ability to choose design features that suit their preferences,” said Hall. “Whether you are looking to buy your first home or upgrade to your dream home, newly constructed homes can offer a personalized aesthetic inside and out.” Join us for the 2025 James Hardie Spring Parade of Homes on April 26-27, from 1:00 PM to 5:00 PM each day! This is your chance to explore some of the finest new homes in the area, meet top builders and developers, and get inspired by the latest trends in home design and construction. We’re excited to showcase a variety of beautiful homes in cutting-edge communities, giving you a firsthand look at what’s possible in modern homebuilding. For more details about new homes in Columbia, Missouri, reach out to us at the HBA of Columbia! Visit columbiahba.com or give us a call at (573) 443-8622. We can't wait to see you there!

A Closer Look at the Costs of Building a New Home

February 25, 2025

If you're in the market for a new home, you may wonder about the factors contributing to the home's total cost. The National Association of Home Builders (NAHB) recently published a Cost of Construction Survey, which details the various costs of building a typical new single-family home. Many of the results show that the percentage contribution of each component has remained relatively consistent in recent years. According to the 2024 survey of home builders, the biggest single component of a new home’s total sales price is construction costs, which accounts for around 64.4%. For example, the sales price of a $665,298 house would likely factor in construction costs of approximately $428,215, or 64.4%. Survey respondents broke down construction costs into eight major construction stages: • Interior finishes (e.g., cabinets, drywall, flooring): 24.1% • Major system rough-ins (e.g. electrical, HVAC, plumbing): 19.2% • Framing: 16.6% • Exterior finishes (e.g., roofing, windows): 13.4% • Foundations: 10.5% • Site work (e.g., architecture, building/permit/impact fees): 7.6% • Final steps (e.g., driveway, landscaping): 6.5% • Other costs: 2.1% The share of construction costs to the total price of a new home is the highest since NAHB first produced the survey in 1998. Some of the factors that contribute to the construction costs are the ongoing skilled labor shortages and building material price increases. The average single-family home size in the 2024 survey was 2,647 sq. ft. of finished floor space, an increase of 86 sq. ft. from 2022. From 2015 to 2022, the average square footage of a home trended downward. Constructing homes with smaller square footage in recent years is a response by builders to meet the current housing affordability challenges buyers face. Though building practices and the cost of labor, land and materials can vary widely across the country, these national averages provide an overall snapshot for the building industry. To learn more about the home building process in Columbia, MO contact info@columbiahba.com or visit columbiahba.com

Ready to Buy in 2025? Five Steps to Help You Plan

By Jami Clevenger • November 27, 2024

If 2025 is the year you have decided to purchase a new home, whether as a first-time buyer or a seasoned home owner, the best time to start preparing is now. Following these five simple strategies will help place you in an ideal position to find a home that is a good fit for you and your family. Take a Closer Look at Your Credit Score. The first step toward purchasing a new home is to examine your finances closely. Start by making sure you know your credit score. Your credit score will help determine the interest rate and associated costs you pay on a mortgage loan. In general, the higher your credit score, the lower the interest rate you will qualify for. Examine Your Finances. Before you search for a home, you must know how much house you can afford. Experts recommend talking to a qualified lender to help you determine your price range. As the buyer, you are the best judge of what you can realistically afford, so you should not set your home buying budget based on your maximum loan approval amount. Plan for a Down Payment and Associated Costs. Once you figure out how much you’re willing to spend, you need to set a down payment goal. The longstanding myth is that you must put down 20 percent to purchase a home. You can move forward with a home purchase with a much lower down payment. Two factors that primarily impact your down payment amount are the home’s price and the type of home loan you secure. In addition to your down payment, you must budget for loan fees and closing costs. Evaluate Your Needs. Put pen to paper, outline what you need and want in a new home and create a “must have” list. Start by thinking about why you’re ready to purchase a new home. Maybe you need a bigger space or want to move to a school district that fits your family’s needs. Creating a list of what you need in your new home will save you time when you are ready to start looking. Your next home may not meet every item on your priority list, so you must decide what factors you can compromise on and how you can stay within your budget. Sell Your Current Home. If buying your home this year is contingent upon selling your home, you should be prepared if the timing doesn’t align perfectly. Another consideration is to ensure you have sufficient funds on hand if you cannot have concurrent home closings. A real estate agent can help you navigate the transitions. A buyer or seller market makes a difference in timing the transaction, and a real estate agent and HBA of Columbia can shed light on local market factors. Contact Jami Clevenger (jami.clevenger@columbiahba.com) to learn about homeownership opportunities in the Columbia, MO area.