How Schools Impact Home Values

Countless factors can affect one’s decision to buy a home, from the neighborhood, square footage, upgrades, and of course the location. These components can all be important, but one that has played an increasing influence on buyers, is the school district of a prospective home.

Parents want what is best for their children and high scoring schools are certainly included in their wishlist. A 2017 survey conducted by the National Association of Realtors highlights how deeply homebuyers feel about school quality and the education of their children. NAR found that 26% of recent homebuyers were influenced by the quality of the school district when choosing a neighborhood. This percentage jumps to 46% among buyers aged 30-39 and is followed by 36% of 22-29 year old’s (1).

For access to top-tier school districts, many buyers have been willing to forgo features like laundry rooms or an additional room. Some parents consider higher home values to be an investment in their children’s future and will weigh the cost of private schools vs. the cost of larger home.

With school quality becoming such a deal maker or breaker for so many home buyers, it is only natural to wonder how this upward trend is affecting home values. Below are a few ways that a local school district may affect home and property values in the surrounding area.

Duke University conducted a two-year study that concluded that housing prices increase by $0.52 for every percent increase in school district PSSA scores (2). In addition to this, according to the New York Times, a 5% improvement in test scores can raise home prices by 2.5% in suburban areas (3). While test scores are the most quotable, they are not the only component that goes into designating an area as a desired school district.

The National Bureau of Economic Research also found a strong correlation between school expenditures and home values. This report posited that for every dollar spent towards an area’s public schools, the home value can increase by $20 (2). This means that additional school costs can have a positive impact on all homeowners in a community, not just those with children in the school system.

This may not be giving the full picture though. According to the bureau, some school districts may just be operating more efficiently, so despite their expenditures being lower, their quality of education is still high. Also keep in mind that the size of a school district or proximity of schools in neighboring district can affect the perception of a school’s value beyond their spending.

When looking at data about home value vs. school districts, it’s important to realize that it can often seem like a chicken vs. the egg dilemma. But on average, the data shows if your house falls within the boundaries of a great district, you’ll likely be able to sell it for more than if you were in an average one because of the increased buyer demand.

Sources
1. https://www.nar.realtor/sites/default/files/reports/2017/2017-home-buyer-and-seller-generational-trends-03-07-2017.pdf

2. https://www.raleighrealtyhomes.com/blog/how-schools-impact-home-values.html

3. https://www.nytimes.com/interactive/2017/03/30/upshot/good-schools-affordable-homes-suburban-sweet-spots.html