It’s a key question for many homebuyers who have or plan to have young children: We want a house in an area with good schools, but what sort of price premium – if any – will we have to pay?
Academic research generally has found that, all other factors being held equal, you pay somewhat more for houses in highly rated school districts compared with homes in neighborhoods where the schools have lower ratings and test results.
Now a national realty brokerage, Redfin, has come out with a study that purports to put hard numbers on the pricing differential. Using a huge database of about 407,000 home sales and nearly 11,000 elementary school districts in 57 metropolitan markets, the study concluded that on average, buyers pay $50 more per square foot for homes in top-rated school districts compared with homes served by average-rated schools. The study’s data came from multiple-listing services plus school characteristics and test scores provided by research firms GreatSchools and Onboard Informatics.
The net result, according to Redfin, is that the price differentials for similar homes – same square footage, number of bedrooms and baths – that are located near each other but served by different school districts can range from tens of thousands to hundreds of thousands of dollars. In some expensive areas, such as coastal California, “homes in the highest-ranking school zones” come with cost differentials ranging from $300,000 to nearly $500,000.
Even when similar homes are separated by just a school district dividing line from each other – half a mile to three-quarters of a mile apart – the price gaps can be significant. To illustrate the point, the study focused on five pairs of recent home sales. One case in Alexandria, Va., involved what Redfin termed “nearly identical” homes – both four bedroom, three baths and 3,000 square feet of living space – located three-quarters of a mile apart. For one house, the local school ratings were high. For the other, lower. The price premium: $130,000, 16 percent.
The study offered parallel examples in San Diego; Seattle; Gilbert, Ariz.; and Beaverton, Ore. Researchers found large pricing differences between home sales in highly rated school districts compared with average-ranked districts in major metropolitan areas from coast to coast, including Los Angeles; Boston; Miami; Washington, D.C.; Charlotte; Chicago; Seattle; San Diego; San Antonio; and Las Vegas, among others. The study defined top-rated schools as those with test scores in the 90th percentile and above, average schools as those in 40th to 60th percentiles, in their respective states.
Join PBN for the best networking event and party of the winter - January 15, 2015 - the Book of Lists Party at the Providence Public Library. Reserve your spot by December 31st and get a holiday gift from PBN!
PBN's annual Book of Lists has been an essential resource for the local business community for almost 30 years. The Book of Lists features a wealth of company rankings from a variety of fields and industries, including banking, health care, real estate, law, hospitality, education, not-for-profits, technology and many more.