How school ratings impact home prices

[ogc163]

While the old real estate adage may have been, “location, location, location,” perhaps today’s real estate motto should be, “schools, schools, schools,” as high-ranking school districts have been increasingly hitting home buyer’s wish lists.

A 2017 study by the National Association of Realtors (NAR) found 26 percent of home buyers considered the quality of schools when looking for a new home. Schools aren’t the only determinant of home prices—safety, commute times, jobs, and housing inventory all play a part in any market. But a good home in a good school district can fetch a higher price, and also hold a better resale value than a similar home in a less-stellar district.

“Economists have estimated that within suburban neighborhoods, a 5 percent improvement in test scores can raise prices by 2.5 percent,” reports the New York Times.

For access to a top-tier school district, buyers in many markets are willing to forgo an additional bedroom and vaulted ceilings. Other parents consider higher home values an investment in their children, weighing the cost of private school ($20,000 and counting in some urban areas) versus the cost of a larger or newer home.

A pricier home in a better public school district could save a family upwards of $200,000 in private school tuition over a decade, in addition to recouping some costs when they sell a home. That prep school tuition? That’s gone for good.

And the emphasis on school districts looks to only increase as more families enter the housing market or upgrade to second homes. The under-36 crowd forms the largest new-home-buying cohort, according to a 2017 NAR study, and 49 percent of that age group has at least one kid under the age of 18 at home. And almost half of them say school districts play a big role in buying decisions.

So what does all this mean for home buyers, and sellers?

You’ll pay a premium for top districts
Home values inside top-rated school districts were 49 percent higher than the national median home price, according to a 2016 study by Realtor.com, which analyzed data from the residential listing database and school district ratings from GreatSchools.org.

We’re talking schools with a 9 or 10 out of 10 rating (8-10 indicate “above average”) looking at mainly academic performance (such as those dreaded compulsory tests). High school stats take into account SAT scores, proficiency scores, graduation rates and college acceptance rates. These scores are usually compared at either the state or national level.

And even dropping from a 10 to a 9 can have a big effect on home values. For example, in Dallas County, Texas, the Highland Park Independent School District (ISD) has an average school rating of 10. In this area, the typical home for sale is, on average, 632 percent more expensive than your typical American home.

About 20 miles northwest from Highland Park is the Coppell ISD, and you’ll find much cheaper homes. Even though Coppell ISD has an average school rating of 9.0, these homes sell for a 170 percent premium over the national average—quite a bit less than those found in Highland Park.

Homes prices dip even more in the Carrollton-Farmers Branch ISD, with an average school rating of 6.6 and homes selling for 129 percent more than the national premium.

Schools aren’t always the main factor. The median income in the Highland Park is high—about $184,000, according to Data USA—and the area is close to Dallas, two factors that also increase property value. Coppell also has a high (but not as high) median income —$119,000, according to city statistics—but its distance from the city and slightly lower-ranked schools likely factor into its comparatively lower property values.

In Atlanta, homes can net a premium in highly rated school districts, but those districts don’t need to rank a top 10 to hit the highest price. The Cherokee County school district, with an 8.8 ranking in 2016, garnered higher prices than other nearby districts, some with higher rankings. Many Cherokee County towns like Holly Springs, Canton and Woodstock score high on lists of the safest places in Georgia, with a lower volume of crime than nearby Atlanta. That matters, too.

There are still affordable homes near good schools
As of June 2017, the average selling price of a home nationwide was $371,200, according to the United States Census Bureau. Buyers looking for a well-priced home in a highly-rated school district aren’t out of luck though. Data from Realtor.com shows there are still many areas of the county where you can buy a home near good schools for under $300,000.

For example, homes in the Peoria Unified School District of Maricopa County, Arizona, have a median list price of $283,000 with an average school rating of 7.9. While the school district covers Peoria and Glendale, Arizona, much of the school district services unincorporated areas in Maricopa County. Many homes listed around the median price are in rural areas or smaller developments outside of the bigger towns, but they still feed into good schools.

Great schools make for an easier sell
And it’s not just about the buying. For homeowners hoping to sell their current home before they upgrade, we’ve got good news. Homes in top-ranking districts often sell faster than homes in less desirable districts — eight days faster, according to Realtor.com. Realtor.com also found that those homes received 26 percent more views than the average listing, and 42 percent more than homes in lower-ranked school districts.

And they retain their value. An academic survey of two decades’ worth of research found that “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,” according to researchers at Duke University.

The data points to a historical trend — as school test scores rise, so do home values. So when it’s time to sell and upgrade your home, doing so inside a decent school district will likely reap dividends.

How school ratings impact home prices | Opendoor.

 

[ogc163]

 

[Ezra]

School funding needs to be divorced from property taxes

 

[Kingcobrakai]

School funding needs to be divorced from property taxes

They already are. The new wave is already starting Texas (not sure about elsewhere). So they started changing Robin Hood (Where the state would “tax” the richer districts and would reallocate to the poorer districts. It was seen as a way to support poor rural white districts by taking funds from rich white suburban districts. And this goes much deeper than that.....) to where big city districts now pay in.

Now it’s to exempt the older population from property taxes for schools because “They’ve already paid enough for their kids”. Once again it’s much deeper than that, but the overarching goals are to not have white people paying for black and brown people’s school.

 

[OfTheCross]

Online school ratings are incredibly flawed, as well.

 

[Ezra]

They already are. The new wave is already starting Texas (not sure about elsewhere). So they started changing Robin Hood (Where the state would “tax” the richer districts and would reallocate to the poorer districts. It was seen as a way to support poor rural white districts by taking funds from rich white suburban districts. And this goes much deeper than that.....) to where big city districts now pay in.

Now it’s to exempt the older population from property taxes for schools because “They’ve already paid enough for their kids”. Once again it’s much deeper than that, but the overarching goals are to not have white people paying for black and brown people’s school.

Shocked that right wing legislatures disingenuously use left wing policy points to pass something worse

 

[ORDER_66]

It was a stupid concept to even tie school ratings to the overall value of the neighborhood in the first place... but as usual when cacs move in the schools have to be top tier... If it's not a specialized high school who gives af...

 

[ogc163]

I have discussions with my NYC cousins who have kids about buying cribs in the area, and my stance is that they generally don't make enough money ( they are working class folks who make between 50-85k, and none are married) to comfortably get a good value on a home because they can't afford to live in neighborhoods with good schools. And it would make more sense imo to rent in a decent school district and supplement their kids education to the tune of about $15-20k.

But they misguidedly think they make "good money" and want to buy houses to say they are homeowners, generally trivializing or ignoring the quality of the schools their kids will probably have access to. I went to undergrad with several tri-state Black working class suburban kids whose parents had similar frameworks and I consistently saw the impact of being underprepared by schools in the middle of the pack working class suburbs.

Thus, working class Black folks in these major metros who can't afford to get into great school districts would be better off putting bread towards supplemental education vs overspending for mediocre suburban schools whose mediocrity isn't apparent until much later in the child's academic career.

 

[Ethnic Vagina Finder]

I have discussions with my NYC cousins who have kids about buying cribs in the area, and my stance is that they generally don't make enough money ( they are working class folks who make between 50-85k, and none are married) to comfortably get a good value on a home because they can't afford to live in neighborhoods with good schools. And it would make more sense imo to rent in a decent school district and supplement their kids education to the tune of about $15-20k.

But they misguidedly think they make "good money" and want to buy houses to say they are homeowners, generally trivializing or ignoring the quality of the schools their kids will probably have access to. I went to undergrad with several tri-state Black working class suburban kids whose parents had similar frameworks and I consistently saw the impact of being underprepared by schools in the middle of the pack working class suburbs.

Thus, working class Black folks in these major metros who can't afford to get into great school districts would be better off putting bread towards supplemental education vs overspending for mediocre suburban schools whose mediocrity isn't apparent until much later in the child's academic career.

A coworker I knew in NJ sacrificed buying a home. She opted to rent in a good school district rather than buy a home in a meh one. Once her son graduates high school she’s buying a house.

 

[Red Shield]

They already are. The new wave is already starting Texas (not sure about elsewhere). So they started changing Robin Hood (Where the state would “tax” the richer districts and would reallocate to the poorer districts. It was seen as a way to support poor rural white districts by taking funds from rich white suburban districts. And this goes much deeper than that.....) to where big city districts now pay in.

Now it’s to exempt the older population from property taxes for schools because “They’ve already paid enough for their kids”. Once again it’s much deeper than that, but the overarching goals are to not have white people paying for black and brown people’s school.

You got any links about this?

 

[Kingcobrakai]

You got any links about this?

Many see "Robin Hood" as a villain. But lawmakers rely on it to pay for schools.

https://www.star-telegram.com/opinion/bud-kennedy/article211993084.html

But I’ll post more as I go along.

 

[ADevilYouKhow]

If we got rid of child labor laws this wouldn’t be an issue

@DEAD7

 

[ogc163]

How Housing and Education Drive Inequality​

Written by Adam Savageau

According to the National Bureau of Economic Research, each dollar spent towards schooling in a neighborhood results in a $20 appreciation in homes (Gorman). Not only do good schools add tremendous value to the surrounding housing, but higher home prices feed back into schools. NBER also notes that, as housing prices rise, property taxes and public school expenditures also increase in the following year (Foy). Housing and education are inextricably linked, creating a feedback loop that drives districts toward inequality. This article will break down the mechanics of the relationship from both the housing and education perspectives.

First, home prices are a core factor of quality education. In the United States, public schools are funded by all levels of government, with local and state comprising 92% of the funding (Allegretto). In more affluent neighborhoods, however, local funding supplies a much larger portion since property taxes are directly associated with school expenditures. In other words, local taxes make the difference between mediocre and excellent public schools. In addition to taxes, affluent neighborhoods have more educated residents, leading to a heightened emphasis on schooling at home, and a higher propensity to volunteer time and money towards school improvement (McKenna). Lastly, high home prices lead to higher rent and taxes which drives out low-income families. Low-income families need more resources to help their children in school, so their relocation leads to less diverse, yet “higher-quality” schools.

Since home prices have been linked to educational quality, we can extend economic principles to explain changes on both ends. This means determinants of housing supply and demand must also affect educational quality. A topical example of supply-side inputs is lumber prices, which are a major driver of prices for new home construction. In August 2022, the Biden administration cut lumber tariffs on Canada by over 50%, greatly lowering the cost of importing foreign lumber (Watson). Since Canada supplies 80% of the lumber in the US market, market prices dropped over 60%, and home construction has been made significantly more affordable (Trading Economics). Cheaper inputs to housing construction will increase general supply and drive down home prices. This chain of effects including tariffs, lumber prices, and housing prices has a negative impact on education quality, ultimately lowering the surrounding housing prices.

Looking at the demand side, we can also conclude effects on school quality are based on the demand for local housing. Recently, the Federal Reserve increased the federal funds rate by 0.5% and announced a long-term target rate of 5.1% (Federal Reserve Board). Since most housing is purchased through mortgages that are linked closely to the federal funds rate, demand for houses fell and market prices plummeted. Homeowners saw property values decline, and nearby schools will draw significantly less funding in the coming tax cycle (Ostrowski). Overall, macroeconomic factors such as commodity prices and interest rates can be tied to funding for public schools, and it will be interesting to see how policy in the next few years impacts the quality of education.

Conversely, we can look at education quality being a driver of home prices. This is a more intuitive approach, as most families that move homes pay close attention to the surrounding schools. Younger parents often relocate with the intent of sending their children to better schools, and they will pay a premium in housing to provide such an opportunity. Due to this heightened demand, districts with reputations for having high-quality schools will simply cost more to live in. Good schools provide children with better opportunities after high school, and they offer more enrichment activities that leave parents with free time. Even for families without children, quality schools lower neighborhood crime by both teenagers and adults (Rivkin). Quality schools are clearly a massive driver of demand for all homebuyers.

Using the logic above, we can again employ economic principles to derive relationships between supply and demand for education and local home prices. Further, the quality of schools is often driven by the quality of teachers, so the behavior of teachers can therefore have implications for surrounding home prices. For example, certain states have active unions that demand higher wages and attract better teachers to schools (Ehrenberg). When unions draw better teachers to a district, educational quality improves, and homebuyers flock (Zhu). Similarly, demand for education can swing home prices as well. When the disposable income of residents increases, parents are more likely to volunteer time and donate money into improving the school in their district (Chevalier). This will draw in more demand for homes in the neighborhood and further appreciate the market. It is easy to see how “each dollar spent towards schooling” could cause a “$20 appreciation in homes” (Gorman).

This effect is not only dramatic, but it moves extremely fast. In 1999, Florida established a ranking system for schools, making the differences in quality very transparent. Professor David Figilo of Northwestern University noted that “An A-rated school in Gainesville added about $10,000 to the value of a home there versus a B school” (Chen). This change was measured over the course of months. Overall, shifters in the supply and demand of education have a strong and immediate influence over housing prices.

Now that the economics between housing prices and schooling quality has been examined, we can look at the relationship holistically. The relationship between housing prices and schooling quality is a positive feedback loop, where an upward trend exists in either both or neither of the variables. Unfortunately, this leads to vast inequality between different schools and families, as the boundary lines of a district separate the good schools from the bad. Since the relationship is cyclical and difficult to break, it becomes difficult for both good districts to fail and poor districts to catch up. Conscious of this, we must explore policy that makes education funding more inclusive so the path toward schooling improvement is more accessible for all.

How Housing and Education Drive Inequality – Michigan Journal of Economics