Buying a home near good schools is a no-brainer. A highly-rated school district, or even just a single stellar school, can impact surrounding home values in interesting ways. Research shows that when looking for a home, "location, location, location" is the number one priority, but schools come in close second for parents and non-parents alike. Find out the pluses and minuses of having highly coveted schools in your neighborhood.
Better Schools Don't Always Equal Better Homes
There is a misconception that the homes in the best school districts are fancier and have bigger lots, streets, and prime views. According to a 2013 survey of schools and home prices by real estate brokerage Redfin, this is not always the case. The survey analyzed elementary school test scores in comparison to home prices nationally. It found that on average, when accounting for size, homebuyers paid $50 more per square foot for houses in top-ranked school zones, when compared to similar homes in average-performing school zones. The survey also found that homes alike in size and amenities – and located within close proximity – could range in price from tens to hundreds of thousands of dollars, if served by distinctly ranked school districts. Additionally, half of the homebuyers in Redfin's study were willing to pay more than they initially intended for a home, and more than half would sacrifice certain property amenities to buy a home near better schools.
The Half-Million-Dollar Question
So how much higher are home prices in the best districts versus average districts? The distinction in price for homes in top districts versus average districts is most notable in coastal cities, according to Redfin's survey of elementary schools across the country. California's coastal cities topped the list of areas with the steepest price differences, with San Jose homes running $500,000 more in price when located in the best districts. High-cost cities such as San Francisco, Los Angeles and San Diego also had six-digit differentials. Miami home prices were more than twice as high in top-rank districts than in average districts. In general, however, home prices in top-performing school districts can be as much as 10 percent higher than neighboring, less desirable school districts, according to Toby Schifsky, a Minnesota Realtor and real estate educator for Kaplan.
Good Schools Not Just A Priority for Parents
Buying a home near good schools is smart for parents of school-aged children and non-parents, alike. Homeowners who don't plan to send kids to nearby schools are still wise to buy within a good school district because excellent schools provide stability for a community, which is a boon to surrounding home prices. According to Schifsky, homes located near good schools hold their value better in down markets and appreciate the most when prices are up. He also likens making improvements to local schools via tax levies, to making structural improvements to a property. Both significantly impact property value.
Prices Not So Dependent on Private Schools
School tuition and recruitment tends to surge when a private school has great ratings. But a high-end private school nearby may not cause neighboring home values to go up in the same way that a coveted public school would. Homebuyers won't necessarily pay more to be near good private schools because they don't pose the same boundary issues as public schools. Public school children must attend a campus located within their school boundary, or get an exception to attend a school outside of their zone. Private schools, however, recruit and accept students regardless of where they live. Although it may be convenient to live close to a child's private school, it's not a necessity that homebuyers are likely to pay premiums for.
The Chicken or the Egg Debate
It's hard to determine which comes first: a good school or an affluent location. In general, residents of more affluent areas tend to invest more readily in education, both time- and money-wise. And as Schifsky put it, a school-improvement tax levy is a small investment to make to protect home values. But in 2013 in Seattle, for example, homebuyers from countries that value good education – such as China – offered cash for homes surrounding good schools, site unseen.