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Home Prices and School Quality—What’s the Correlation?

home prices and school qualityThere’s an often-unquestioned assumption that better quality schools equates to higher property values, and vice versa. But is it really as simple as that? A recent report by Collateral Analytics (CA) attempted to put that question to the test.

The Collateral Analytics report, entitled “Housing Values & School Quality,” was co-authored by Dr. Michael Sklarz, Dr. Norman Miller, and Dr. Anthony Pennington-Cross. It set out to examine two particular questions: 1) how much does school quality impact residential home prices and 2) how stable are those premiums over time? The report also examines whether any correlation between home prices and school quality is also affected by which level of school you’re discussing—elementary, middle, and high school.

According to the Collateral Analytics report, “households will sort into neighborhoods that best match their preferences for local public goods. Households that value the bundle of attributes in a property the most will bid the highest value for the property. One of those attributes is the location. Applying this logic, households that value school quality the most will tend to cluster and live in locations with better school quality.”

The report examines an area near the border between the Evendale/Princeton School District and Sycamore School District, both located in Cincinnati, Ohio. CA located a pair of homes featuring comparable amenities, that were located near each other, but which fell into different school districts. CA found that the school in the more highly valued school district did indeed showcase a higher home price—$150k higher, which worked out to a 58 percent increase in value per square foot.

“Such homes in the less valued school district tend to be occupied by families without children or those sending their kids to parochial schools,” the report states. “The homes in the Sycamore school district are occupied primarily by younger families with more kids. This is what one would expect in an open market that sorts by location preferences.”

Collateral Analytics found these price spreads across school district lines to be common. “Despite increasing focus on school quality in recent years, we have seen the fixed spreads in home values being quite consistent over time in most markets.”

To read Collateral Analytics full report on home prices and school quality, click here.

About Author: David Wharton

David Wharton, Online Editor at the Five Star Institute, is a graduate of the University of Texas at Arlington, where he received his B.A. in English and minored in Journalism. Wharton has over 15 years of experience in journalism and previously worked at Thomson Reuters, a multinational mass media and information firm, as Associate Content Editor, focusing on producing media content related to tax and accounting principles and government rules and regulations for accounting professionals. Wharton has an extensive and diversified portfolio of freelance material, with published contributions in both online and print media publications. Wharton and his family currently reside in Arlington, Texas. He can be reached at David.Wharton@theMReport.com.
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