It’s no mystery that, at any given time, the current economy impacts home values, but that’s not the only predictor of a home’s worth. Foreclosures in the area, local planning department aims and even the habits of your neighbors can determine the worth of your home.
Then, there are schools. Did you know that the quality of the local school district has a direct impact on your home’s value?
Whether or not you have children, the schools in your area will determine the asking price of your home. How? Read on.
Resale value is an important consideration when buying a home
The current market value of a home is based on what a willing buyer will pay for it. Imagine all the “willing” buyers out there with children. These buyers do their homework and decide to buy homes in a “quality” school district. Can you blame them?
When enough of these parents pay a premium price to live in a good school district in your community, expect the prices to rise in those areas and to remain stagnant or even fall in others. If your home is among the “others,” you didn’t do your homework before buying.
Hey, that’s understandable. Most Americans don’t consider their home to be the major financial investment that it is. Understandable, yes. Wise? No.
When you put together the wish list of what you want in a home, please include the words “resale value.”
Numerous studies show that a good school district positively impacts value. One 2009 study, conducted by Ken Corsini at Georgia Institute of Technology, found that homes near schools with schooldigger.com ratings of four or five stars held their value better during the Great Recession than those near schools with fewer stars.
David Figlio, professor of education, social policy and economics at Northwestern University, noticed that in Florida, homes located near schools awarded an “A” rating by the state gain an additional $50,000 in value versus those near schools with a “B” rating.
This premium gap is notable in the award-winning Bellevue school district in Washington state as well. There, homes are valued 15 percent higher than those in other districts.
“Fifty-three percent of buyers with children in the home under the age of 18 years said the quality of the school districts is an important factor when purchasing a home,” according to studies by the National Association of REALTORS®.
An earlier study showed that nearly one-fourth of buyers were willing to pay 1 to 5 percent above their home purchasing budget for a home in a highly rated school district.
What makes a “good” school district?
One of the most common determinants of school quality is test scores. For instance, the website GreatSchools.org bases its ratings primarily on test scores.
Although castigated by some, U.S. News and World Report’s annual high school rankings are based on three criteria:
- Scores on state-mandated tests
- How effectively the school educates minority and disadvantaged students
- Participation in and performance on the International Baccalaureate and Advanced Placement exams.
Additionally, an older study sponsored by the Andrew W. Mellon Foundation suggests that “mean test scores are significantly related to property values.”
How much more is a good school district worth?
Determining a dollar value for homes located in high-performing school districts seems to be the only area the experts disagree on. Some researchers support study claims that homes in school districts with high test scores are worth $16,000 more than similar homes in poor-performing districts.
A Brookings Institution report indicates that, on average, homes in high-scoring school districts are worth $205,000 or more than those in low-scoring districts.
Figlio says that homes in top districts net a 23 percent premium over homes in other districts. The positive news is that no matter the fortune of the housing market – whether it’s rising or falling – the premium remains consistent.
Although the size and price of a home are always key considerations, when considering the home’s future value, the quality of the school district may sometimes trump all else.