Neighborhoods with at least one good elementary school have greater home values as well as higher home price appreciation over the long term compared to homes without good schools, according to the 2016 Schools a Housing Report released today by ATTOM Data Solutions, the new parent company of RealtyTrac.
ATTOM analyzed home values and price appreciation in 2016, along with the 2015 average test scores in 18,968 elementary schools nationwide in 4,435 zip codes.
A good school is defined as a school with an overall test score of at least 30% above the state average.
Of the zip codes with at least one good school, the average estimated home value was $427,402. This is 77% higher than the average home value of $241,096 in the zip codes without good schools.
“While good schools are one of the top items on most homebuyer checklists because of the quality-of-life benefit they provide, this report shows that high-performing schools also come with a financial benefit for homeowners in most markets, at least over the long term,” said Daren Blomquist, ATTOM senior vice president.
“Meanwhile, home prices in zip codes without any good schools tend to be more volatile, which might work to a homeowner’s financial benefit in the short term but not over the long term of at least 10 years,” Blomquist said.
Approximately 143 metros, or the 83% of the 173 metropolitan statistical areas analyzed for the report, had higher average home values in zip codes with good schools than in zip codes without good schools.
In some metros, the difference was significant from areas with at least one good school and the areas without. The metro area with the greatest difference in home prices was Birmingham, Alabama, at 169% higher. Flint, Michigan, came in second at 129% higher, followed by St. Louis at 99% higher, Detroit at 97% higher and Baltimore at 95% higher.
“In my experience, buyers will almost always choose to buy a home in a good school district,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market, where average home values were 64% higher in zip codes with goods schools than in those without.
“In turn, this creates greater demand for homes in high-performing school districts and causes these sub-markets to appreciate in value at higher rates than other neighborhoods,” Gardner said. “Interestingly, we see demand for these homes from buyers without school-aged children as well because they look at the school district as an added layer of protection should home prices start to soften.”
Homeowners in zip codes with at least one good school gained an average of $74,716 in value since the purchase, an average return on investment of 32%. On the other hand, homeowners in zip codes without good schools gained an average of $23,311 in value since their purchase, an average return on investment of 27.5%.
For families looking to rent, it is an entirely different story as some are being priced out of good school districts. Families looking to move this summer are taking a closer look at the quality of school districts. However, in California, that could be problematic.
Rents in some cities are significantly higher in areas with the best-rated schools over areas with low-rated schools.