Headlines tell of a great unraveling in California\u2019s real estate market. Builders are losing money, home prices are falling, foreclosures mount, and lenders are withdrawing credit. Logic would have it that California\u2019s much-heralded Million Solar Roofs program would be slowing too, particularly since home equity lines of credit are the number one source of financing for residential photovoltaic systems. Yet, solar seems to be enjoying a particularly swashbuckling year in the new home market, and contrary to the real estate trend. The real estate downturn actually seems to be cementing the idea in homebuyers\u2019 minds that solar rooftops should be a standard feature on new homes, not merely an option. It makes sense. In a down market, qualified buyers expect more from home builders and with concern about high energy prices they increasingly prefer energy efficient, solar equipped homes. The jury is still out as energy regulators await the final numbers for 2007. Yet those on the ground remain cautiously optimistic about the prospects for solar in California. \u201cIndustry-wide the solar market isn\u2019t as hot as it used to be,\u201d admits Barry Cinnamon, Akeena Solar president and head of the California Solar Energy Industries Association. \u201cYou\u2019re going to see that the growth rate in 2007 was not as great as 2006.\u201d The real estate downturn, plus the complications of adapting to the state\u2019s Solar Initiative incentive program have slowed the market, according to Cinnamon. However, he is quick to point out that on the upside higher energy prices are improving the economics of solar and that most solar customers--at least in the retrofit market--do not have to seek sub-prime loans. Moreover, he notes, solar systems themselves are becoming more efficient at making power. As a leading California solar installer, Cinnamon has an intuitive feel for what is happening in the solar market. His cautious optimism is backed by data that so far do not show any downturn in the state\u2019s solar program. \u201cI haven\u2019t seen any numbers yet that have made me reach any conclusion\u201d that there is a downturn, added Adam Browning, Vote Solar executive director. A recent California Public Utilities Commission progress report characterized participation in the state\u2019s million solar roofs program as \u201crobust.\u201d As of late September (after the mortgage market started tanking) 1,157 solar systems with total generating capacity of 9.4 MW were installed under the California Solar Initiate program. Under that CPUC program, investor-owned utilities provide rebates to home and business owners for photovoltaic panels. An additional 3,952 applications representing 150.6 MW of capacity were being processed at the time. Pacific Gas & Electric saw a bit of a drop in solar incentive applications when summer ended, but then saw in upswing in October, according to data provided by the company. Applications then dipped a bit in November to 450, but were still higher than in many months this year. Its peak month was July, at 883 applications. In San Diego, applications for incentives to the California Center for Sustainable Energy spiked in October at 83, the highest level yet since the state\u2019s new solar program took effect. \u201cGreen is indeed the new black,\u201d said center spokesperson Terrie Steele Nowhere has this proven more true than in one of the places in California where real estate prices have sunk the most and foreclosures have skyrocketed: the Sacramento metropolitan area. There, the median sales price for homes has declined 15.8 percent over the past year, according to the California Association of Realtors. Over the same period, new home sales have plunged 40.5 percent and new home prices have dropped by 17.5 percent, according to California Building Industry Association data. As a result, major builders operating in Sacramento and similar markets across the nation are losing money hand over fist. Typical is Lennar Homes, one of the largest builders in the nation, which committed to the Sacramento Municipal Utility District to build more than 1,200 new solar homes. The company announced a third quarter loss of $514 million, with home deliveries down 41 percent, new orders down 48 percent, and a cancellation rate on orders of 32 percent. Then there is Centex, which has posted major losses. The company has pledged to build 107 new solar homes in the Sacramento area. Yet, both companies have maintained their commitment to building and selling energy efficient, solar equipped homes, points out Wade Hughes, SMUD SolarSmart new homes program manager. So have all the other builders that have committed to the muni to build solar homes. How could they not do so when solar tract homes are selling at twice the pace of non-solar homes? Solar is becoming so successful in Sacramento, that the muni expects 40 percent of the new homes sold in its service territory will be energy efficient and outfitted with photovoltaic panels. \u201cWe barely dreamed of getting a 20 percent market penetration\u201d when the muni started the SolarSmart program a year ago, said Hughes. Now, he added, \u201cWe can envision a time when if you\u2019re building houses that are not SolarSmart, you\u2019ll have to explain why.\u201d The muni has approved agreements with builders to put up 2,600 new solar homes under its SolarSmart program, which provides rebates for photovoltaic systems. It is negotiating agreements that would cover another 1,400 homes, bringing the expected total of new solar homes built in its service territory over the next three to four years to 4,000. Roseville Electric, which is providing incentives for 1,300 new solar homes, has had a similar experience, said Mark Riffey, the muni\u2019s residential new construction program manager. \u201cTo date, none have pulled out,\u201d he said. Buyers not only are attracted by the energy savings, but also by builder pricing strategies on solar homes. Recognizing that it costs less to market solar homes and that they sell faster--which can reduce builder debt service costs on inventory--developers are pricing the homes at roughly the same price as conventional homes even though they cost an additional $10,000 to $13,000 to build, observed Hughes. Looking ahead, the solar industry anticipates that new financing arrangements will help keep homeowners and buyers in the photovoltaic market. Browning pointed to the City of Berkeley\u2019s plan to loan money to homeowners to install solar systems and pay off the loans through a property tax assessment. He predicted that state lawmakers would introduce legislation next year aimed at \u201cenhanced financing\u201d for solar systems, based on a number of emerging ideas, including the Berkeley program. Ultimately financing for solar systems should be the same as for purchasing a new car: \u201cinstant,\u201d said Cinnamon. Both cost about the same, but many customers lose interest when they have to go to the bank and endure a home equity loan or refinance process, he said. More downdrafts are ahead in 2008 for housing, according to the California Association of Realtors. Yet with continuing innovation, it could be another good year for the solar industry and California\u2019s million solar roofs program.