How Schools Can Impact Home Prices

The Affect Schools Have on Home Values

Are you wondering how schools can affect home prices?

There is no denying that the quality of nearby schools can impact the price of a home. But while this fact has always been somewhat of a given in the real estate industry, recent statistics now demonstrate just how much of an impact school quality has on real estate.

Many home buyers are willing to pay more for good schools and are even willing to trade bigger and better homes to access quality school systems.

In 2013 The National Association of Realtors surveyed home buyers and found 22 percent of them listed a home’s proximity to the school as part of their buying decision.

Twenty-nine percent of the buyers listed school quality as a deciding factor in their decision. What you are about to learn is how schools influence home values!

People are Willing to Pay More For Good Schools

Realtor.com surveyed home buyers to determine how they viewed school performance as a part of their overall buying strategy. What they found in their study showed that a surprising number of people are willing to give up things to get within the boundaries of a good school district.

They found that for every five buyers, one buyer would be prepared to give up a garage or bedroom for a good school.

They also found that one buyer would even settle for a smaller home for every three buyers surveyed to get access to a good school. And over half of those surveyed said they would sacrifice nearby shopping options for a better school.

Beyond sacrificing things in their home purchase, buyers were willing to pay more money for a home in a good school district. One out of five of those surveyed said they would pay between six and ten percent more for a home – and one out of ten people surveyed stated that they’d go even higher, paying up to 20 percent more for a home with access to the right schools.

In my experience as a Massachusetts Realtor for the past thirty-one years, what applies nationally mirrors the case here as well.

Certain towns in the Metrowest Massachusetts area command a much higher price for an identical home in a city that does not have the same cache for their school systems.

For example, as far as towns go, Southborough Massachusetts, Westborough Massachusetts, and Hopkinton Massachusetts have highly regarded school systems. If you took a typically four bedrooms, 2.5 bath colonial in any one of these towns and compared the price to, say, the same home in Milford or Northbridge, the price would be substantially different.

Depending on the home’s location, you could be talking about a difference of $50,000-$100,000! Obviously not chump change but history shows people are willing to pay for it. What’s interesting is these towns are not more than fifteen to twenty minutes away from one another.

Some buyers will actually come to these areas with the specific intention to buy a home there specifically for the excellent school systems. This is why Southborough, Westborough, and Hopkinton have become known as “destination towns” in the Metrowest region of Massachusetts.

Good Schools Protect Home Prices

This survey conducted by Realtor.com gathered data from 1,000 participants. The survey showed that a whopping 91 percent of respondents included school boundaries in their decision-making process for choosing a home.

Not all home buyers have children or even plan to have children, making these figures even more interesting. People are not just interested in the quality of school districts for the educational opportunities they provide; they consider school quality as part of the overall value of the real estate.

To further demonstrate this, we can look at research done by Ken Corsini. Corsini discusses a research project he did on housing values in Metro Atlanta. His research showed that school performance in a neighborhood substantially affected the value of homes in that neighborhood.

Looking at home prices in 2006 and then 2009, he found that those homes with great schools nearby tended to weather the falling real estate market much better than those with only mediocre schools nearby.

This data was so compelling that Corsini began using school performance as a major factor in his real estate investing.

Again this holds true in my area of Massachusetts as well. Towns with top-rated school systems weathered the real estate slump from 2006 to 2012 much better than those towns that did not have highly rated schools.

So when people ask me, “do schools impact home prices?” the answer is yes, they do!

Good Schools are Important for Multiple Reasons

All of this information paints an interesting picture of the impact of schools on home prices. It shows that buyers care about the quality of schools – for evident and not-so-obvious reasons. Some buyers are planning on starting a family or already have children.

These individuals are looking towards the future for their children and are willing to pay more for less to give their children access to good education.

However, there are other kinds of buyers out there that consider schools as part of an overall equation in determining the desirability of a property.

As Corsini demonstrates in his article, buying a home in an excellent school district makes good business sense. Good schools can help insulate a home from market fluctuations and make a property a more sound investment.

Real estate investors buy homes for very different reasons than the average nuclear family, yet they are coming to a similar conclusion on homes’ desirability near good schools.

This is a perfect example of how schools can impact buying decisions.

Good Schools and Property Values – A Chicken and Egg Situation

When discussing why good schools do what they do to property values, it is easy to get into a “chicken and egg” dilemma. On the one hand, it is possible to argue that good schools are responsible for increased property values.

After all, we just discussed multiple reasons why buyers will seek out homes located in good school districts and pay a premium for them. The conclusion that good schools drive up prices is an obvious one.

On the other hand, it is also possible to argue that the affluence common in neighborhoods near good schools is responsible for the quality of the schools. Generally speaking, good schools tend to be located in neighborhoods that have a higher standard of living.

The affluence present in these neighborhoods tends to create school districts that score higher on tests and tend to rank higher in performance than schools located in poorer neighborhoods.

For buyers searching for a home, though, the exact relationship between good schools and property values may not be as important as the hard facts – better schools tend to lead to higher property values.

If you are selling a home in a good school district, you can reasonably ask for a higher price for your home than a similar home located in a less desirable school district. If you are a buyer searching for a home in a good school district, you can expect to pay more for that home.

Good Schools vs. Higher Taxes

While one major benefit of having good schools is the appreciation of home values, this also leads to paying higher property taxes.

There is a direct correlation between excellent schools and higher property values. Given this, those who live in towns with great schools pay more in taxes for this benefit.

For those working-class families relocating with schools as a high consideration; this is not an issue. However, what can become problematic are those who have lived in the community who no longer consider schools to be a benefit.

We consistently hear from real estate agents the battle between those who have relocated for the interest of schools and those who are being priced out of their community due to taxes. Most often, this comes from seniors who are on a fixed budget.

With their kids grown and out of the school system, we often hear that they don’t want any more money allocated to improvements in the education system.

On the one hand, you can sympathize with the fact nobody wants to pay more in taxes but what they often don’t consider is how much equity has been put in their pocket because of the schools! Homeowners may pay a little more annually out of their pocket when it comes time to sell; however, they will be rewarded.

Of course, many of us become shortsighted and don’t think of a monetary payout in the future. We all get too wrapped up at the moment.

Some seniors do get squeezed out of their town due to higher taxes, fees, and other expenses despite the fact their equity has grown.

Unfortunately, these are the facts of life we have to live with. Some folks may be paying more in real estate taxes than they should be. If this is the case, it is always good to know how to appeal high real estate taxes.

There are times where we all lose sight of the fact that our assessed value could be off, which is causing our taxes to be higher than they should be.

Each year, it is good to look at the town field card and check for the accuracy of data that applies to the property.

How to Research Schools

Given that schools are super important not only for your children’s education but also for the long-term value of your property, how do you go about the best school systems? There are some ways to determine the viability of an education system.

Some of them include:

• Checking online sites for statistics on test scores, the curriculum offered, the rate of attending higher education, etc.
• Going in and visiting the school yourself. Speaking to the head of education and other department heads is a good move.
• Talk to the real estate agent you are working with. A good buyer’s agent should have at least a general understanding of what schools are considered top-notch and less desirable.
• Talk to parents who have kids in the school system already. Speaking to a parent is a good idea because they already have children who are participating daily. A parent generally can get some clue as to how the teachers are for delivering a good education.

Other Statistics Worth Looking at Include:

• Student to teacher ratio.
• Testing results in math, reading, and science.
• Cost per pupil.
• Enrollment and class size for students.
• Teacher educational attainment- How many teachers have master’s degrees or Ph.D.’s.
• Languages offered.
• The number and size of specialized programs for gifted or needy students.

While none of these methods alone are full proof, you will have a better understanding of if the school system will meet your child’s needs by using all of them.

Final Thoughts

For young couples who have a young child or are planning to have them, there is often a struggle between getting a home that meets their expectations and also providing a quality school system for their family. There are often tough choices because young couples purchasing homes can see a dramatic difference in what their money can buy between a community that has top-rated schools vs. one that does not.

These are the kind of decisions that should get a hefty amount of thought before a conclusion is made. On many occasions, I have seen parents decide to opt for a better home initially. This purchase becomes a “transition” property before their children reach school age or at least upper-level education.

Everybody is different when it comes to schools and the home buying process. Just make sure you give it a considerable amount of thought before ultimately making your final decision.

Additional Helpful Information on Schools

• Where to find ratings on schools throughout the country in each state via Great Schools.
• The Public Schools Toolkit via Realtor.Org.
• The Biggest Pitfalls of Picking an Elementary School via Great Schools.
• How to evaluate Kindergarten to high school via School Digger.

Use these additional resources to make a smart decision when purchasing a home. Hopefully, you now see how schools can impact home prices!

About the author: The above Real Estate information on how do schools impact home prices was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 32+ Years.

Are you thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.