By Ashley Gower
Aug 12, 2024Understanding the Influence of School Districts on Property Values and Home-Buying Decisions
When you set out to buy a home, a myriad of factors will run through your mind as you create your must-have list. Your list will probably include neighborhood, size, location, and amenities. Among these, the quality of the local school district often plays a pivotal role in determining property values. This aspect isn’t just important for families with children; it also influences home values for individuals, investors, and couples without kids. Understanding how school districts shape property values can provide you with valuable insights, helping you make more informed and strategic real estate decisions.
- Higher Property Values: Homes in high-performing school districts often see greater appreciation and higher values.
- Increased Demand: Strong school districts attract more buyers, leading to faster sales and higher prices.
- Neighborhood Appeal: Good school districts enhance neighborhood stability and desirability, boosting property values.
- Higher Property Taxes: Homes in top-performing districts usually have higher property taxes, contributing to increased school funding and property values. The inverse is also true and can perpetuate educational and financial inequality.
- Market Resilience: Properties in top school districts are generally more stable and retain value better during economic downturns.
Start Your Search with Home Location
In real estate, the principle of “location, location, location” is frequently emphasized as the primary factor influencing property value. Within this concept, the quality of the local school district is a crucial component in determining home values. This relationship is more than academic; it has practical implications for anyone considering a home purchase.
For families with children or those planning to start a family, the quality of nearby public schools is a major priority. A well-regarded school district can provide not only educational advantages but also a strong sense of community and stability. Even for buyers without children, the attractiveness of a high-performing school district may not be immediately apparent, but these districts often lead to increased property values, enhanced neighborhood appeal, and strong resale potential.
Whether you are a young family, an empty nester, or a first-time homebuyer, understanding how school districts impact property values can aid in making strategic, informed real estate decisions. Here, we explore the key ways school districts influence home valuation.
Four Ways School Districts Impact Property Value
1. Property Value Appreciation:
The impact of school districts on property values is most evident through property appreciation. Often, there is a direct correlation between the performance of local schools and the value of nearby homes. High-quality school districts tend to be associated with increased home values due to heightened demand and perceptions of community stability and prosperity.
For instance, a study reported by The New York Times revealed that a 5% improvement in school test scores can lead to a 2.5% increase in home values. Similarly, the National Bureau of Economic Research found that every additional $1 spent on public schools results in a $20 increase in home values. This data underscores the financial benefits of investing in quality education, benefiting both schools and local homeowners.
While standardized test scores are just one aspect of a school’s performance, they provide accessible information for narrowing down your home search. Homes in reputable school districts generally experience higher demand, quicker sales, and increased prices.
2. Increased Housing Demand:
High-performing school districts generate significant demand for homes. Research from the National Association of REALTORS® (NAR) indicates that 30% of buyers aged 33-42—likely to have young children—consider “quality of the school district” as a top factor when selecting a neighborhood.
Homes in desirable school districts often receive more online views and sell faster compared to properties in less favored areas. Realtor.com reports that homes in high-performing school districts sell eight days faster than those in other regions. This heightened demand can drive up property values, as buyers are eager to make competitive offers on homes in these sought-after districts.
Even buyers without children may find homes in strong school districts attractive due to the associated stability and potential for long-term value appreciation, further boosting property values.
3. Neighborhood Stability
The reputation of a school district can significantly influence the perceived stability and appeal of a neighborhood. Schools with strong academic performance and positive community engagement often create a “halo effect” that extends to the surrounding area.
This perception of stability and prosperity can enhance property values. Homes in neighborhoods with highly regarded schools are often viewed as more desirable due to the associated benefits, such as higher incomes, better resources, and lower crime rates. Although this is more of a perceived effect than a direct cause-and-effect relationship, it can still powerfully impact property values.
Appraisers consider both objective and subjective factors when determining a home’s value. As properties in desirable school districts generally achieve higher sales prices, this can influence appraisals and future property values in the area.
4. Impact of Property Taxes
While public schools may seem “free” to attend due to the absence of upfront costs or monthly fees, they are funded through local, state, and federal taxes, with local property taxes playing a substantial role. Homes in high-performing school districts often have higher property taxes, which are used to support and enhance the schools, creating a cycle of increased performance and higher property values.
In contrast, the funding disparities between affluent and less wealthy school districts can perpetuate educational inequality, affecting low-income students and contributing to a cycle of poverty. Additionally, the NAR found that home prices in high-performing suburban school districts were 49% higher than the national median and 77% more expensive than those in lower-ranked districts.
Many states have stepped in to help compensate for this imbalance locally, but it’s still important to understand how local property taxes fund public schools and the broader socioeconomic impacts concerning your own home research.
What Else Matters?
Resilience During Market Volatility:
Homes in high-performing school districts tend to exhibit greater resilience during market downturns. An experiment by BiggerPockets, a real estate investor, found that properties in districts with high school ratings (4-5 stars) experienced less severe value declines during recessions compared to homes in less desirable districts (1-3 stars). This resilience is attributed to the sustained demand for homes in strong school districts, which can help maintain or even increase property values during economic uncertainties.
For sellers, this means that homes in reputable school districts can be a safer investment during volatile market conditions, potentially achieving higher prices and quicker sales.
Proximity to Private Schools:
The presence of private schools can also influence property values. While private schools are not funded through public taxes, their proximity can enhance the appeal of a neighborhood. Homes near prestigious private schools often command higher prices, as buyers are willing to pay a premium for the convenience and prestige associated with these institutions.
The presence of both public and private educational institutions can make an area more attractive to potential buyers, driving up property values.
Finding the Right Fit:
Ask ten different families and you’ll get ten different answers on what makes a school “good”. For some, traditional metrics such as test scores and graduation rates are sufficient, while others may seek a school that offers a specific cultural or emotional fit for their children.
If you’re looking for a school district that aligns with your family’s specific needs rather than just a highly ranked school, consider exploring resources like Niche.com’s blog post “Beyond Test Scores, What Really Makes a “Good” School?” for additional questions to help you find the right school.
School Districts Matter, Whether You Have Kids or Not!
The impact of school districts on property values is substantial and multifaceted. Regardless of whether you have children, evaluating the quality of local schools can be a strategic component of your home-buying or real-estate-investing process. The benefits of purchasing in a high-performing school district extend beyond educational outcomes, affecting property values, demand, neighborhood stability, and property taxes.
Homes in strong school districts generally appreciate faster, attract higher demand, and offer greater long-term value. Understanding these dynamics can aid in making a well-informed real estate decision. Collaborating with a local real estate agent can provide further insights and help evaluate the best options based on your unique needs and goals. By factoring in the quality of local schools, you can make a more comprehensive decision that benefits you now and in the future.
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