The Regan Team - Petaluma Homes & Mortgage Blog - PetalumaLending.com: Do schools affect home prices?

Perception is everything.  Almost all the buyers we work with whether or not they have children in school always ask "Are the Schools Good?"  Good Schools tend to be a reflection of good values in the area and draw people to a particular neighborhood which creates demand and creates higher values!!!

And even people without school aged children ask that question for the future re-sale potential.

We do see the schools affect home prices here in Bucks County.  In fact, in Levittown, the same EXACT home can range $30-40K more based solely on school district.  

However, I think these clients are going about it backwards...they should be looking in their desired school district.  

IMHO, home prices are already reflective of the school district ratings.  For instance, we have a subdivision called Tatum Highlands that is divided by Jomax Rd.  On the north side, it's the Cave Creek School District - rated 1 or 2 (depending on the stats) in the state.  On the south of the Jomax Rd is Phoenix, in a highly rated, but still "phoenix perception" school district.  Typically, homes on the north side sell for 10% higher than on the south side and they were built by the same builders!!!!!

In West Memphis and Marion Arkansas Schools play a huge role in value.  But the houses are priced to reflect that at the time of the listing.

You bet that school rankings effect home prices.  We have areas in my market where homes are priced a good 10% higher than similar homes in a lower ranked and less in demand school system.

I don't discuss school quality or the relative "good" or "bad" buyers.  However, I point them to resources for school information and they can make up their own mind. 

It is entirely possible that the home that is the subject of this post was already priced for the local school system and similar homes in a higher ranked school system could easily have been $40,000 higher.

The buyer's agent should have researched the matter.  Perhaps they did.

The quality of schools do reflex the price of homes.  The better the schools the higher the home prices.

Here in Nashville the school districts and individual schools are KEY to some families. Schools like Ravenwood in Brentwood TN is very sought after. You will find that people are willing to pay a little more than the surrounding areas to be within a certain school district. 

$40K! Wow. I'm with Lenn, it's always a top priority to direct home buyers to moderate resources where they can make up their own mind.

YES!  As a matter of fact I advise my "parent" clients to leverage tools like Greatschools.org to find a balance between their childrens education and their budget.

A school system is critical to the community in which the the houses are built.  Families buy houses, kids live in families and end up going to schoos in thos communities.  Many of them grow up and stay in that community, in part because of the comfort and needs that community allows.  Schools are more important to families with kids than empty nester's, but a good schools system helps the prices of all the homes.  How much is dependent on how important these rules are to the person buying. 

Without a doubt they affect home prices...In fact,  I had a seller who knew there home was worth less than comparables in other neighborhoods because fo the schools.  How much it affects it;  depends on the schools....  Mine reduced 20% to sell becasue fo the schools.

Absolutely, schools affect value but it should already be reflected in the comps.  If the buyer's agent pulls comparable sales for the home and is careful to pull from within the same school district the relative value should already be reflected.  A $ price difference for different school districts could be established and used in evaluating a comparable from another school district.  Pull another set of comparable homes from the second school district to contrast with the first set and establish the true price difference for the particular size, price range you are interested in.

The quality of school districts are extremely important here in our market in Columbus/Central Ohio.  Because of this, I keep a copy of the local rankings that our newspaper highlights every August, and send it to all my buyers that have children (or may have some day). 

It is very interesting to compare the average home price in the various suburbs to the school district ranking.  They correlate very closely.

In the Nashville area, Brentwood schools drive up the value of properties up 10-15%. Both Ravenwood and Brentwood High schools are ranked 10 by greatschools.org. I, along with many of my clients, are happy to pay the premium on homes to get a great public education.

I can point out several burbs in Chicago where homes in a certain school district are valued at $50,000+ more then homes in the neighborhood across the road zoned for a different district.

In a rising market when "appreciation covered all sins" I don't think buyers factored schools as heavily into their decision. Their desire to own was so great, that it was an amenity they chose (perhaps foolishly) to overlook. I think, too, that people now see a house purchase as a 'home purchase'-- where they will be living a long time and hence more concerned about quality of life in the area they choose to live.

Hi Michael. They absolutely affect home prices.

How much?  Depends on many things...

Thanks for writing,

Ken

Michael - Absolutely! We have a school district that brings a huge premium. Homes just outside of the school district bring 25% less for exactly the same home. Its an established fact around here and the first requirement out of a new clients mouth is it must be in that school district or don't even show it to me...

In hot market when appreciation covered all sins, I don't think school quality mattered as much. Today, people see a 'house purchase' as a 'home purchase'-- a place where they will live a long time. The place they live becomes a lifestyle choice, and neighborhood plays a much larger role.  

Absolutely! The school system in a given town is a big driving factor for home prices. I have seen some people put themselves into a little ranch house in a nice town for the simple fact that they will be able to send their children to that town's schools. It matters a great deal.

Personally i think it does when a family wants to stay in the same school district or same school.  But every area is different. 

In my area schools DO play a huge part in pricing and resale.  Most of my Relo's have already don't their research on schools and know exactly which schools rank higher...along with that comes a higher sale price typically and a faster sale.

Michael - I believe the school district, and which specific school the children attend absolutely affect home prices. There is a Blue Ribbon School in Newport Beach that residents specifically move to the area so their children can attend that school.

Although I feel 40K is extreme, as a parent, I would find the school in the neighbourhood to be an important factor.  My kids currently go to an out of bounds school, since the one in our neighbourhood is not  a desirable school.

Absolutely, schools affect home values. Thats what primarily drives the prices. Buyers want the best schools for their children and buyers w/out children and investors want to buy in these areas for resale. At open houses, the prospects that come in have researched these areas already and know about the schools and if they dont they ask about them.

In my neck of the woods, the answer is YES YES and YES.  School systems do affect home prices.  Example:  We have a builder in two communities, building the same plans, about 1 mile apart.  One community is in District A, priced at $230K and up.  Community 2 is in District B, priced from $180K and up.  Schools matter.

I don't know about all markets but I have to say absolutely in my areas of New Jersey.  I've written a couple of posts on supporting your school protects the value of your home.  Again, in my areas, compromised school systems reflect lower house values and vice versa.   I often note to that the some of the lower priced towns, with compromised school systems pay more in taxes too.  Not all, but some towns definitely do.

If you're running comps for the area surrounding the subject property, all those properties are already adjusted for the school as they should be going to the same school.

I am sure schols impact the home values, $40K in my market is a bit steep of a swing in price. However if $40K is less then 10%, then why not.

Almost all of my buy  ers ask about schools, even when they don't have kids...gotta love forward thinking buyers. 

My area is in the middle of 3 school districts. Two are more desirable than the third and there is a definite difference in prices among the 3.

In the areas of Socal they affect supply and demand HUGE_lee (he's the son of Bob Lee and Jen Lee)

Absolutely schools affect home values, also taxes!

Casting my vote for the schools; good discussion.

The school district or feeding school has a huge impact on the property value.  For instance, we have two areas that are proof home values differ based on the school district the home feeds to.  One is Barton Creek - half is in the Westlake ISD and the other is in Austin ISD.  Homes that feed into Westlake ISD trend on getting a higher price.  The same holds true for several sections along Bee Cave Road... most feed to Westlake ISD but several feed to Lake Travis ISD.  The homes that feed into Westlake ISD always net more.  The same holds true for homes in Southwest Austin - some feed to Bowie High School and others feed to Austin High School... the homes that feed to Bowie High usually have higher prices. 

However, I think a $40,000 discount if the other homes are not selling this low is acceptable.  If your client wants to feed into a particular school - then he must analyze the home costs in that particular and reanalyze his purchase situation. 

The answer is simple ... it affects it a lot! I had a house in a hot school district once that drew three offers the very first day. And ALL were over the list price.

Although folks that are retired with grown children or no children at all may have concerns about tax dollars being spent on the school system, there aren't many other items that can impact a neighborhood as significantly as the school systems; good or bad.

Michael, people will use all sorts of excuses for a price reduction.

I think that's an intangible reason important to those that care about the schools in the area.

I'm not going to add much that others haven't already hit upon..but my initial thought was "if the school district is so important to them, why not just look in that district" vs. offering less...seems they're selling their kids short to save a buck. And using that as a reason to offer less and so much less -- does not hold water. And as others have already alluded to herein, values are already set in part because of school district ratings and perceived value.

They do affect it, but not in the way this consumer nitpicked. Well, I don't know the list price was close to FMV to begin with, but if your agent friend did their comp evaluation and the price was a good one, then throwing in a curve ball like that is silly. But the overall answer is yes, schools affect the housing market, for sure.

We absolutely see the school district affecting the salability of the house, but not necessarily the price. I think part of this is that there are short sales and foreclosures dragging down the prices even in the best areas ( which translates to best schools, whether right or wrong) so more buyers can afford to be in the better school districts. Now the particular school is being added into the equation where before it was more decided by housing prices and their choices were more limited.

Schools absolutely effect the value of a person's home. In Northern New Jersey it is kind of understood that (aside from only a few municipalities) when you buy a home you are choosing to either have a high purchase price and taxes, OR pay for your kids to go to private school. Then there are those who feel comfortable fighting very poor school systems with parent involvement, tutors, and tech schools. (All of NJ's counties have county run Technology Career High Schools that are far better than most of the public schools.) For some, $24K a year in property taxes and a home costing $100k's more is worth it when they weight in $4000+ per child for 13 years of school. Likewise, living in an area where their mortgage and taxes are lower can make it possible to send their kids to private or parochial school. It's a give and take.

What?  Are you kidding? This is a rhetorical question - no???? It's an OBSESSSION around here.   If its a city school with a mixed population - it doesn't matter how good the schools are - the scores overall are going to be lower.  Home prices sag significantly in that situation.

Personally, as someone who has taught at the undergraduate level and holds a Ph.D. from a significant institution - I think the whole thing is NONSENSE.   I think a lot of it is parents wanting to outsource the education and being obsessed with getting their kids (who are all in the genius category) into Harvard and MIT. Within in certain perameters,  public school your child goes to has little to do with what they will become. It comes from the home - AND the child.  You can not turn a laid back kid into academic demon no matter how hard you may wish to.

But - do schools affect prices - Yes!!! The impact is enormous.  It's so significant I've seen 2 BR cooperatives in two towns with banner schools (co-ops not even CONDOS) going for $100k more than a 3 BR house in community with good schools but not famous schools.  It's absolutely nutty.

Michael, I feel schools do help the prices. They definately help the selling factor over other areas.

Michael, In my opinion (for what it is worth) I don't feel an offer on a home should be gauged on a school system.  It is NOT part of the value of the HOME.. If a CMA was done, and this home is comparable to other ones in price, I  think no matter what the buyer says there is more to this than the schools.  To offer $40k less.. where in the world did they come up with this price?  What is it relevant too? 

I don't know the actual $ amount but I say absolutely yes.  In my area there are obviously better schools & better districts.  The ones in the better districts are more popular just for that reason.  There was a situation where one town was going to break out of a lesser school district & suddenly became more popular after they tried.  In the end they couldn't afford to 'break out' and re-subdivide on their own.  In fact, I sold my house because of it not happening.

Sure it does,

But not always as a positive direction, too close is a bad thing, to far is not positive either,

if in an area that no longer has kids, and or the school is closed the school grounds could become the area hang out, and become a problem.

We have seen a number of schools now sold and the properties being redeveloped.........

It is not all perfect in paradise

Of course schools make a difference in the perceived value of a home. That being said, my question always is, "If the buyers have an issue with the schools, why don't they limit their seach to areas that have schools that meet their standards?"

Strong public schools support home prices--the higher the schools are ranked, the higher the home prices will be.  Who doesn't want the best possible education available for their children? 

Wow I'm surprised some said they don't.  In our area here they have a direct impact on pricing.  Most of the comments have said it all, I'm just shocked in some area's it is said it doesn't matter.

In Silicon Valley, school scores are a critical factor in the sales prices and overall market strength.  In Los Altos, there's a stark difference between South Los Altos (Cupertino schools) and the rest of the town in terms of value.  You'll see an even bigger difference comparing Cupertino to Los Altos or Los Altos to Palo Alto.

The school scores have the strongest impact (in my opinion) when they are top scoring schools across the system (elementary, middle, and high).  A strong elementary system but weak middle and high schools (e.g. Sunnyvale) will drive prices higher but only to a point.  This is why you see towns like Los Altos and Palo Alto (with strong scores across all schools) turning out high home prices.

I think it depends on the neighbourhood. In some upscale areas of Toronto, great elementary schools can make a difference.

It's either private or public and if public is an excllent alternative, that can save you money.

$40,000 on $800,000 is about right.

It does affect us at this time although all the schools around us are excellent, there is a preception among different buyers that one is "better" than the other.  It is rare to flip someone who wants a particular school to another.

I had a buyer last year who flipped after researching the schools and is really happy she changed.  I do think people should consider that as it can affect resale in the future.

We would have to respond a strong YES! We happen to live and work in a suburb where the school district is ranked among the top in the state, and there is definitely a premium placed on living here. Out of town buyers specifically request to move here or to similar communities because of highly rated schools. I can't speak for other areas of the country, but in Northeast Ohio, schools are critical to home values. Thanks for the post.

Schools surely make a difference in the Houston area. Usually people veer away from homes in school districts with bad reputations. There are a few areas where it is hard to give away a home because the school are not good. Most people shop for homes based on which school district they are in. It is one of the filtering categories we use first.

The comment above is correct that not all buyers are looking for a house in a good school zone because they are not in the stage of life where schools are necessary. However, supply, demand and price are a proven direct link in economics. When a school district is in GREATER DEMAND due to its reputation, the houses will be in SHORTER SUPPLY which will lead to HIGHER PRICES...which leads to a quality cycle. The students in said district will improve as real estate prices are driven higher, which leads to better rankings. I was an administrator in a school district, and this is a cycle districts study. This cycle greatly effects the districts revenue when they get their money based on property value. When they school's ratings go down, the spiral goes the other way, and property values decline. This is why schools make such a HUGE deal about ratings. They directly effect many people in many ways.

I think schools do affect home prices but not in the way that buyer wanted them to.  If the schools are not the "best" (whatever that may be), then the prices of the homes that have sold before have been affected.  Any CMA performed will reflect those prices.  You can't expect a seller to give a discount because the schools don't match the buyer's expectations.

Ideal topic for discussion, good schools should have an influence on home pricing since it also impacts property taxes.

Is this a very good school? That's a question parents with kids always want to know before they buy a house.

Easy...slippery slope when it comes to fair housing.

I think that the school system is important, most people are looking to buy in the best xchool areas. It's always important for resale down the road.

Patricia

The quality of the school system is very important.  We are lucky to have good public schools locally, but we also have several private schools that many people send their children to.

I guess the same would be true about distance to the school if the buyer had school aged children. The closer the better?

Yes in my market. Elementary schools with good reputations help to support pricing in mediocre neighborhoods. This is true in markets where there is a perceived gap between the quality of schools within the same distrcit.

Schools make a huge difference here.  There can be a large difference in price.  Having said that, it all depends on what you are looking for and if the schools will fit your needs.  Also, districts change!  

All the best, Michelle

What was the asking price? 

Inquiring minds want to know :)

Seriously though, school system rating has is a big impact on prices.

I need some scale here.  In a $1m neighborhood, $40k is nothing.  In a $150k area, it is everything.  So, $40k could be too high or too low to offset a superior school. 

But, better schools have more demand.  more demand means higher price.  It isn't always that simple, but there are schools around here that have been top performers for 30+ years.  THOSE are the areas that always have demand.

For sure it can be a reason for a buyer to offer less. However if it is not the "right" school for the buyer...maybe they should be looking elsewhere.

Margaret

Schools are always a factor one way or another in a purchase.  I tell buyers who say that schools do not matter to them, that schools may matter when they resell their property.

No I dont think schools effect home prices but it will effect it selling

I think I find comments made by a couple other agents in my area interesting.  In our area, we don't have school districts which are commonly seen in other parts of the country.  Our schools are all run by the county.  I will say that schools in Williamson County are highly desirable.  And even some schools may be more desirable than others but they are all run by the same entity.  In a recent Newsweek report, 5 of the 7 high schools in the country rated in the top 6% in the nation.  One of those 5 is thought to be less desirable by some consumers but Newsweek didn't agree.  So while some may pay more, Williamson County as a whole is known to have very good schools.

Michael...

I have listed product where the schools came up frequently. When the "right school" wasn't within the district, people thanked me and walked away. On the other end, I have had product in a coveted school area that sold rather quickly. In both cases, it definitely affects the SPEED of the sale of the home. AS to whether it creates more value, I am of the opinion that it could. I know that property near colleges go for more because people rent out rooms. Thank you for this thought inducing post.....