Do School Ratings Impact Home Values?

When deciding what home to buy, many potential buyers weigh their wants and needs including the price, size, architectural style, commute time and of course, the location of their target house against the challenging realities of the current market. Homebuyers are increasingly adding another priority to their wish list – quality schools.

According to a 2017 study from the National Association of Realtors, over a quarter of homebuyers focus on the quality schools as an important factor in determining their buying choices. Understanding the impact of quality schools on home value is an important consideration for buyers, both those with school-aged children or without.

In a 2015 survey, discovered that a third of buyer would choose a smaller home in a better-quality school district. And the emphasis on quality schools will continue to increase as young homebuyers (under 36 years old) now make up the largest group of first-time buyers, half of whom have at least one school-aged child.

Home Buying Decision: Better public school district or private School?

Most people understand that there is a relationship between schools and property values, but many question if it makes more financial sense to buy less of their dream house within a good public school district versus buying a better or bigger house in a poorer performing school district. Like much of homebuying there isn’t only one way to consider the decision.

Some potential homebuyers with school-aged children reason that if they can afford the down payment and the monthly mortgage payments for a house in a quality school district they can save the cost of private school tuition. According to Private School Review in the Los Angeles area the average private elementary school tuition is approximately $11,000 per school year and private high school tuition is over $20,000. And they further calculate that when they sell their higher priced home the appreciation in value will outweigh their higher initial investment while their “investment” in a private school education will have no financial return.

Also depending on mortgage rates and the higher amount of down payment, the financial costs over a 30-year mortgage may be lower than the monthly payments than the cost of private school tuition, in addition to higher property taxes (which is generally the primary source of public-school funding.)

On the other hand, like most real estate factors, the decision is greatly influenced by local conditions and the decision is not just a financial one. What is the quality of education at the “better” schools in a buyer’s target area versus the quality of the local private schools? Simply put, what is best for my child’s education?

Here’s What the Data Shows

According to a 2016 study by home value in highly rated school districts were 49% higher than the national median average. Another report from the National Bureau of Economics concluded that for every dollar invested in public schools yields a twenty dollar increase in home values within their district. Obviously, this increase not only benefits homeowners with school-aged children, but homeowners throughout the community.

The findings of this national study are compelling, but while it shows the correlation between school funding and home value, it doesn’t tell the whole story. Perhaps more significant is school performance. A New York Times article recently reported that economists note that as test scores rise so do home prices. In one suburban school district a 5% increase in test scores resulted in a 2.5% increase in property values. Another benefit found that home values in these communities retain their value better than their counterparts in “lesser” school districts.

Still these findings cannot be viewed separate from the other attributes within a school district. Generally, the higher quality schools are in areas that offer other amenities such as well as maintained parks, higher walkability scores, entertainment and cultural facilities and most importantly, safe neighborhoods.

There is Help

Homebuying presents many challenges that confront buyers to make difficult choices. Practical every buyer is forced to make concessions when choosing a property. It’s also an alignment between their wants and needs and the hard realities of the market. Making the choice between school options is one of those. Notably one of the hardest.

In addition to sharing real estate analysis and my expertise, I encourage my clients to seek the advice of their financial adviser or accountant, along with input from professional mortgage brokers in identifying their financial and borrowing capacity. With the added priority of school choices, school placement specialists can be another asset to consider.

Given the far-reaching impact of a home-buying decision requires buyers to be as informed and educated as possible especially in this current “seller’s market.” Buyers need an experienced professional to act as a source of information, guide and adviser to help clients understand and navigate the complex buying process.

Los Angeles Area Schools

Among the many factors in considering where to live, the proximity to quality school is near the top. It’s not only important for parents of school aged children, but also for buyers or sellers given the impact a school’s reputation has on property values.

The school finder link provided is intended as a first step. Before purchasing or renting, parents of school-aged children need to contact the district’s school for availability and registration requirements. When considering private schools, in addition to availability and registration requirements, commute times and transportation should also be considered.

The Los Angeles Unified School District Resident School Identifier: This website matches address within the school district to the corresponding elementary, middle and high schools.

Great Schools is another informative website that rates Los Angeles area schools.

The list below is recognized as some of the best private schools in the Los Angeles area:

Archer School for Girls

Berkeley Hall School

Brentwood School

The Buckley School

Campbell Hall

Crossroad Schools for Arts and Sciences

Harvard-Westlake School

Immaculate Heart

Le Lycée Français de Los Angeles Raymond & Esther Kabbaz High School

Marlborough School

Marymount High School

Milken Community Schools

Notre Dame Elementary School

Notre Dame High School

New Roads School

Page Academy Private School

Oaks Christian School

Oakwood School

Yeshiva University High School of Los Angeles

Wildwood School

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