School Bond Issues

By Doug Hutchins, Douglas County Realtor

ThunderRidge High School in Highlands Ranch

ThunderRidge High School in Highlands Ranch

Two weeks ago I received a phone call from a neighbor in
Castle Pines North who is helping the Douglas County School District hold informational sessions about their proposed bond issues that will be on the ballot this November. She asked a simple question that I hear frequently:

How much are home values impacted
by the quality of the local school district?

The Douglas County School District recently mailed a
promotional piece on the bond issue stating that 2% to 10% of your home value is directly tied to the quality of the school district and that not passing the bond issue could adversely impact home values.
She was curious if I had any similar data that I could share as the Douglas
County School District works to build support for the bond issue.

Intuitively I know that the quality of the school district does impact home values, but I had never seen the details of a study trying to answer this question. Everyday I work with Buyers who clearly communicate they only want to live in an area with high quality schools. Most Buyers already walk through the door of my office knowing that Douglas County has great schools and this is what initially drove them to consider purchasing a home in Douglas County.

I am a numbers guy, though, so intuition is not enough for me. I need facts and data. So, I started researching this simple question - How Much of My Home Value is Determined by the Quality of the School District? My neighbor forwarded me the document Douglas County was using as support for the 2% to 10% claim. The support is a National Education Association (NEA) working paper from April 2004 titled ” K-12 Education in The U.S. Economy. Its Impact on Economic Development, Earnings, and Housing Values.“

The NEA paper sites the results of 9 different studies between 1981 and 1999 where researchers worked to isolate the home value attributable to the local school district.

The majority of these studies identified the increase in home values associated with an increase in school testing scores. All but one these studies showed an increase in home values of between 2% to 6% for a 10% increase in the test scores of students. One study did show an increase of 10% in homes values for a 10% increase in test scores of students. A general consensus among these studies was that the increase in the test scores had to be unique to that school district. In other words, if every school district increased their test scores by 10%, then there would not be a corresponding increase in home values.

To support the claim that property values would drop in Douglas County if the school bond issues would not pass, the Douglas County School District needs to indicate how student test scores would suffer if the bond issues do not pass. If student test scores were to hold steady even if the bond issues did not pass, then there would not be a corresponding drop in home values. In addition, the school district would need to detail whether or not surrounding school districts would see similar declines in test scores because of funding issues in those districts.

Although the NEA research appears to be very thorough, I thought a better source of statistics could be found from the National Association of Realtors (NAR). I consider NAR a more independent source of data than the NEA when it comes to the impact of schools on home values. Unfortunately, none of the NAR research addresses “quality” of schools. NAR regularly releases a survey of Buyers that asks the importance of being “close” to schools, but there is no quality component to the question. I was not able to find any other sources or studies that associate home values to the quality of schools.

Currently there is one piece of home valuation data in metro Denver that I believe provides a strong correlation between home values and the quality of Denver schools. If you were to look at a neighborhood map of metro Denver and what has happened to housing prices in the past 12 months, homes in the Douglas County, Littleton and Cherry Creek School districts have held their home values better than homes in other school districts in metro Denver. These three school districts are usually considered three of the top school districts in metro Denver. Again, though, it is impossible to say what percentage of this strength is attributed to the schools.

One 1996 study showed conclusively that quality of schools was the most important fact in maintaining residential homes values. You might want to read that detailed academic study.

So what does this all mean? I believe that the quality of the school district does impact home values, but I hesitate to assign a value to this association. I believe it is more an absolute item. In other words, a Buyer who wants a high quality school district will not even consider a home in a low performing school district, regardless of price. Make sure as a home buyer you understand the quality of the neighborhood school district before you buy!

October 21, 2008 | Filed Under Denver Real Estate News, Home Buying Issues, South Suburbs, Uncategorized 

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