School District Impact on Property Values and Home Prices

School district impact on property values can influence home prices and home buying trends.

It’s back-to-school season and we can’t think of a better way to get into the school spirit than by discussing the importance of a good school district in the home buying process. We’d venture to guess some of you who are reading this didn’t even know that this was a factor in a home buyer’s decision. Well, it certainly is, and quality of the nearby school district is such an integral part of many home buyers’ research that it’s becoming increasingly available as a search option on websites that rank the best places to live. Because it’s a key factor in the home buying process for many buyers, it impacts other factors, like home prices and property values. It’s this trifecta of school districts, home prices, and property values that we’re here to talk about. Let’s start with the importance of a good school district.

the importance of a good school district

It’s not all about bed-and-bath ratios and square footage. Many families intentionally choose to buy homes in high-quality school districts because they want a good education at a walkable school for their children. But did you know that even home buyers who don’t have kids or don’t plan on having kids also consider the quality of the school district in their home buying decision?

For one thing, a good school district can be a sign of a healthy local economy and can contribute to the overall value of the real estate within the district. Even if you’re not a real estate investor, buying a home is still an investment, and one you’ll want to make in the right location. In fact, a survey by the National Association of Realtors said that 20% of home buyers listed proximity to schools as a deciding factor in their home purchase. Another 25% gave school quality as a leading reason for their decision to buy.

So a good school district is important to home buyers, but to what degree? This brings us to home prices.

school district impact on home prices

There are many factors that play into home prices. The quality of the school district can be just one of them. This usually happens in one of two ways. On one hand, sellers know that a good school district is more desirable, so they may use it as leverage and set a higher asking price. On the other hand, if you’re a buyer and school district is one of your top must-haves, you may be willing to pay more to snag a house in the right school district. A Redfin survey says that on average, people pay $50 more per square foot for homes in top-ranked school zones compared to homes in school districts with average rankings.

We’ve also found that people shopping for homes are willing to sacrifice some items on their “wants” list: a 2013 survey by Realtor.com said that 50% would give up access to shopping nearby and about 44% would forego a bonus room. In that same survey, of the home buyers who said they planned on buying a home within the next two years, more than 44% said they would be willing to go over their budget by up to 10% just to stay within the school district they want. Just how far will home buyers go to get in the school district of their choosing?

It’s a trade-off. And for the individual home buyer, it will come down to what they personally value most. We’ve looked at the importance of school district and how home prices can be affected, but what about property values?

school district impact on property values

This closes the loop on the trifecta. Where home prices are higher and school districts are better, property values also tend to be higher. And as property values appreciate, an increase in property taxes usually follows—a portion of which goes toward funding the local school district. This is why higher-quality schools with students that score better on tests tend to be present in more affluent neighborhoods, because they sometimes receive more funding from the community.

It’s unclear as to which came first, but there’s a definite correlation between school district quality and property values. And it’s a good rule of thumb to keep in mind when you’re home shopping: wherever you buy, you’re buying into the local school district.

A good rule of thumb to keep in mind when you’re home shopping: wherever you buy, you’re buying into the local school district.

Additionally, some sources suggest that properties in the best school districts in the country held up well during the housing crisis. One such source is a study by Ken Corsini of BiggerPockets, which states that, between 2006 and 2009, “properties near schools with a rating of four or five stars were almost completely insulated from declining values, while those near schools with one to three stars experienced massive losses in value.” This tells us that a neighborhood of built-up equity can act as a buffer for the community during rough or changing market times. It’s not an impenetrable barrier, but it can help insulate homes through market changes—an added benefit to buying a home in the right school district.

not the most important factor

Although every buyer should take the school district into consideration, this factor should never be more important than your true priority of finding the right home for you at the right time. You can trust Cardinal to help you prioritize. We’ll set you up with a licensed loan originator who can help you get pre-approved and set realistic expectations for the home buying process. And if you don’t have a real estate agent yet, we can get you connected with some of the top agents in your area who can go over your wants and needs and help you find the home that rounds out everything that’s important to you.

Did the school district play a part in your decision to buy your home? We want to hear about it on social media.

About the Author

Laura is one of our blog authors. Currently living in Charm City, she's a Great Lakes native who likes salsa dancing, brews a mean cup of Joe, and reads the Chicago Manual of Style for fun. As a young first-time home buyer, Laura likes writing educational pieces that dispel mortgage myths and give helpful hints about what the home buying process is really like.