Does your school district affect your home’s value?
Home values are determined through a complicated series of calculations roughly based on the cost of actual construction plus value-adds like proximity to shopping and other conveniences. The prices that other nearby homes have sold for in the past are also taken into consideration. Formulas are applied, mysterious algorithms are run.
In short, home valuation is magic and appraisers are all wizards.
Although the workings behind the curtain may be both intimidating and seemingly unpredictable to home buyers and sellers, there is one thing that can definitely affect your home’s value - your school district.
The Numbers Have It
A quick twirl around the web turns up a handful of recent surveys and studies that all say essentially the same thing: better schools means your house might be worth more.
It’s interesting, though, a study from the Federal Reserve Bank of St. Louis found that schools that were just barely below average for quality, had no influence on home prices in that school district. These houses were priced based only on their characteristics, like having three bedrooms or a gorgeous kitchen. On the other hand, higher-quality school districts increased each home’s price well above what the physical characteristics would have normally indicated.
The New York Times noted that “There are many factors in a home price, of course, but economists have estimated that within suburban neighborhoods, a 5 percent improvement in test scores can raise prices by 2.5 percent.”
How Much More Will You Pay?
The problem with trying to price a home based on less concrete metrics, like school district quality, is that there’s someone else out there who also has an idea what that added value amounts to and may want to fight you for it.
But, you can still look at price trends for homes in a very general and national way to get a feel for the influence of school districts. The Washington Post reported on a huge study by Redfin that included 407,000 home sales and almost 11,000 elementary school districts across 57 metropolitan markets. The study’s goal was to determine the average additional value brought to homes by their elementary districts.
Surprisingly, top-rated districts brought a whopping $50 per square foot extra when compared to average schools. That’s an extra $100,000 for a 2,000 square foot home!! The effect in California’s hottest markets was even more dramatic, with buyers paying up to $500,000 more for the best districts.
Aside From Metrics...
at the end of the day, it’s really simple. There are only so many houses in the best school districts, and there are more buyers to buy than sellers to sell. Since school districts are so important to many buyers, it results in higher sale prices. Consequently, those higher sale prices end up being comps when the appraiser comes around a few months later, raising the prices of all the homes around them. So, in a very real way, it can be said that your school district, provided it’s a good one and not merely average, has a massive impact on your home’s value.
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