It’s no secret that buyers will pay a premium to live in neighborhoods with better schools. Parents of school-age kids tend to put test scores and student-to-teacher ratios at the top of their priority list, and even buyers who don’t have children are apt to judge an area by the quality of its schools.
Exactly how much of a premium do good schools command? For our 2009 Home Value-Schools Ratings Report Card, Cyberhomes analyzed nearly 6,000 U.S. ZIP codes using median home sales prices from the first quarter of 2009 and school ratings from GreatSchools, a nonprofit organization that compares standardized test scores within states and rates public, private and charter schools 1 to 10.
The final grade? Median home sales prices in ZIP codes with very-high-rated schools were 62 percent higher than those in ZIPs with average schools and more than 92 percent higher than those with low-rated schools. Looking at it from another angle, ZIPs with mediocre or low-ranking schools had median home values below the average for their broader market, while ZIP codes with top-notch schools commanded a 31 percent premium over the market as a whole.
In many cases, the better the schools, the bigger the premium. The 63005 ZIP code of Chesterfield, Mo., for example, scores a perfect “10” in the GreatSchools ranking. The median sales price of $541,300, meanwhile, is about four times the median home price for the St. Louis area overall. The same is true in the 85253 ZIP of Paradise Valley, Ariz., where schools boast the highest rating and home prices are five times the median for the Phoenix region.
Of course, it’s hard to say which comes first, good schools or high home values. See last year’s report card for a more in-depth explanation. In many cases quality schools are initially a byproduct of high home values because schools benefit from increased revenue from property taxes, and buyers in higher-priced areas tend to put extra emphasis on the value of education. But once an area earns a reputation as having good schools, the trend feeds on itself. Parents are willing to pay a premium to live in these areas, which drives up — or in the case of a declining market, props up — home value, and that in turn bolsters school quality.
By the Numbers
| 5 | COMMUNITIES where schools make the grade and home prices looks like a (relative) bargain |
| 5 | CITIES where great schools are contributing to high-priced neighborhoods |