Do Schools Affect Property Values?

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A quick rundown

As the old home buying saying goes, “location, location, location”, but let’s not forget that this is largely influenced by a variety of factors, one of which is schools. Schools play an integral part in many buyers’ decision making and property values can be impacted by the performance of the neighborhood’s schools.

Key Points

If there’s one thing parents feel strongly about, it’s their children’s education. As such, schools play a big part in influencing property values because parents and people planning on having children, make up a large percentage of home buyers or owners. In fact, according to the National Association of Realtors, 26% of recent home buyers placed a big importance on the quality of the school district, when they were choosing where to live. In the 30-39 age group this numbers rises to 46%, and in the 20-29 age group it’s at 36%. Needless to say, schools play a big factor in home buyer decision making, so we’re going to delve deeper into the question, how do schools affect property values?

How do schools impact property values?

school bus

The National Bureau of Economic Research has found a definite tie between school expenditures and home values in every neighborhood. In fact, the “Using Market Valuation to Assess Public School Spending” report indicated that home values increased by $20 per dollar that was spent on public schools in a community. The Wall Street Journal reported in 2010 that there are definitive links between school performance and home values as well. So, the correlation between schools and home values simply cannot be denied.

You’ll pay top dollar for a property in a top school district, according to a 2016 study by Realtor.com which showed that homes that are situated in top school districts are valued 49% higher than the country’s median home price. These are areas where the schools have a 9 or 10 out of 10 rating, with excellent academic performance specifically. According to studies done by Duke University, for every percentage point increase in the PSSA scores of schools in a district, house prices rise by $0.52 per square foot.

For example, in the Highland Park Independent School District (ISD) in Dallas County, TX, there is an average rating of 10 for schools, and home values are typically 632% higher than the average US house. While the schools aren’t the only factor influencing house prices in this area, it’s certainly a big contributor.         

If you’re looking for a more affordable home in a good school district, don’t panic. There are still areas where this is possible. For example, the Peoria Unified School District of Maricopa County, Arizona has an average school rating of 7.9 and the median price of homes is $283,000 which is below the average selling price of $371,200 in the US, according to United States Census Bureau in 2017.

Pros and Cons of buying a home near a school

Pros

  • Good resale potential: Buying a home in a good school district means that you’ll probably have no problem selling it again because the area will still be in high demand in the future, and you can sell it for a higher price.
  • Homes retain their value: Houses in good school districts will appreciate in value, according to multiple surveys which have shown a correlation between home appreciation in the area and school academic performance.
  • Save big on private school: Buying a home in a good public school district can help parents save a lot on having to send their kids to private school, because the schools in the district will be more than good enough.
  • Kid-friendly amenities: In school districts there are often playgrounds and other kid-friendly things to do, which can be a big plus for families.
  • Safety and security: Schools are often located in safer areas, with safety being a big priority for them. So, these districts are often safer than those without schools.
school library

Cons

  • Higher cost: You’ll pay a premium for homes in a good school district, so it’s important to weigh up whether this is worth the location or not.
  • Downsize for the right location: If you have your heart set on a particular area due to the school district, you might need to downsize by 1 or 2 rooms, to be able to find a home within your price range.
  • More traffic: There’s bound to be more traffic if you move into a school district, particularly in the early mornings and the afternoons when students are being taken to and from school.
  • Increased noise levels: School districts are typically noisier with all the school activity, lots of kids around and more traffic.

Other factors that have a big influence on property values

Now that we’ve covered the location part of property values, there are a variety of other factors that play a big part in determining the market value of properties so let’s take a look at some of these.

  1. Supply and demand: If there is a high demand and a lower supply level in an area, this will cause a rise in prices, and vice versa for a lower demand with a higher supply level.
  2. Interest rates: The higher the interest rates are, the more expensive a mortgage will be and then properties are invariably sold at a higher price. The opposite is true for lower mortgage rates.
  3. House age: Newer homes can often sell for a higher price because buyers know that they won’t need to do any major repairs or renovations that they would have to do on an older house. However, this also depends on the condition of the house.
  4. Property size: The size of the house in square feet has a large impact on the value of the house. It stands to reason that the bigger the house, the more it is worth, however usable space is also factored into this.
  5. Real estate market: The housing market in your chosen area has a large impact on how much a property is worth. If the market is in a slump, house prices will more than likely be lower, and if it’s booming, prices will likely be higher.

FAQ

Depending on the school rating, home values can drastically increase near certain schools. Researchers at Duke University have found, “for each percentage point increase in school district PSSA score of students who scored proficient or above, the prices of housing in that area increase by $0.52 per square foot,”.

Homes in high performing school districts are often larger and are priced higher, according to a study conducted by the Brookings Institution. The study showed that there’s an average difference of $205,000 in the price between homes in high performing school districts versus low performing school districts.

When you’re buying a home, make sure that you consider the big picture for your family. Aside from a school district, there are many other factors influencing your choice. For example, whether you need a certain number of bedrooms, what your budget is, whether you need a backyard, and so on. You’ll need to weigh these up against the school district consideration and make a choice based on all the factors. If you end up moving into a school district that isn’t your first choice, you could consider a private school for your kids.

School ratings have a major impact on home values in the surrounding area. As we mentioned above, home values in districts with top rated schools (either 9 or 10 out of 10), are priced about 49% above the median average home price for the country. In other words, the better the school rating, the higher the home prices or values will be.

Final thoughts

Buying the right home for your family is crucial, and it’s important not to get caught up in the idea of buying in a good school district. Consider all the factors that are part of your decision on which home you’d like to choose and remember that this may be the home you’re still in after the kids graduate and go off to college. Make your home buying decision with the bigger picture in mind and remember your long-term plans as well.