RealtyTrac analyzed school test scores for nearly 27,000 elementary schools in more than 7,200 U.S. zip codes, along with home price affordability in those same zip codes.
Out of 1,823 zip codes with at least one good school, 1,192 (65 percent) were unaffordable for average wage earners — meaning average wage earners would need to spend more than one-third of their income to buy a median-priced home.
Metro areas with the most unaffordable zip codes with good schools were Los Angeles (183), New York (158), San Francisco (77), Chicago (58), San Diego (49), Riverside-San Bernardino, California (39), Seattle (35), Miami (33), Denver (30), Sacramento, California (30) and San Jose (30).
“The quality of local schooling when deciding on a new home is certainly not new. However, its importance continues to grow as, at the elementary age, parents are increasingly cognizant of the fact that this is the first stage in the process toward getting into a good college,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. “Although many of the best elementary schools in the greater Seattle area are in more expensive neighborhoods, there are several quality schools that are actually located in less expensive markets. That said, buyers who place a high priority on schools may have to be ready to compromise other factors, such as the style of home or proximity to their job.”
“Neighborhoods with the ideal combination of good schools and relatively affordable home prices are very competitive for buyers,” said Lydia Creasey, associate broker with RE/MAX Alliance, covering the Denver market. “At the very least, buyers in these markets need to be pro-active and act quickly as soon as a new home hits the market, and in some cases buyers in these neighborhoods have either had to settle for a less-updated or smaller home or increase their price range.”
Metro areas with the most affordable zip codes with good schools were Chicago (172), Detroit (45), Phoenix (22), Miami (20), Charlotte (17), St. Louis (16), Tampa (15), Milwaukee (14) and Rochester, New York (13), followed by six metro areas with 10 apiece: Albany, New York; Nashville; Buffalo, New York; Rockford, Illinois; Grand Rapids, Michigan; and Kansas City.
“Over the past decade there has been a focus on improving the South Florida public education system and we are seeing great results,” said Mike Pappas, CEO and president of the Keyes Company, covering the South Florida market. “The Miami-Dade County public school system was awarded the prestigious ‘Broad Prize’ by The Eli and Edythe Broad Foundation in 2012 for the ‘Most Improved Urban School System,’ with neighboring Palm Beach County public schools as the runner up. Our overall median price for South Florida real estate is 20 to 30 percent lower than other major U.S. cities. This combination gives South Florida homeowners many good options to find good schools in affordable neighborhoods.”
“Student achievement and high graduation rates become important factors during the home selection process,” said Michael Mahon, president at HER Realtors, covering the Cincinnati, Dayton and Columbus markets in Ohio. “Popular school districts further increase demand in subject communities leads to multiple offers and high competition amongst home buyers, resulting in competition in what has been a low market availability market for much of 2015 in the Ohio markets.”
In zip codes with at least one good school, the median home price was nearly double the median home price in zip codes with no good schools. The median sales price in 2015 for homes in zips with good schools was $411,573 on average, 95 percent higher than the median home sales price in zip codes without any good schools ($210,662).
Home prices in 2015 increased at the same annual pace in zip codes with at least one good school as in zip codes with no good schools. Median home prices increased 7 percent on average from 2014 to 2015 across the 1,823 zip codes with good schools and also increased 7 percent on average during the same time period in the 5,424 zip codes without a good school.
School data is from each state’s Department of Education in 2014. Test scores are based around the test average of each state with the state average being a score of 1. The higher above the state average the school is, the higher the grade. For the purposes of this analysis, RealtyTrac considered a good school if the score was 1.33 or higher.
Median price data is from publicly recorded sales deeds and mortgages for single family homes and condos. In some states known as non-disclosure states where the sales price is not required on the sales deed RealtyTrac used loan amounts and estimated property value at time of sale instead of the sale price.
Average wage data came from the Bureau of Labor Statistics and was from the first quarter of 2015, the most recent available. Affordability was calculated based on the percentage of average wages to make monthly house payments on a median priced home, assuming a 10 percent down payment and 3.80 percent interest rate based on Freddie Mac data. A zip code was considered affordable if the affordability percentage (percentage of average wage needed to make monthly payments on a median priced home).
Only zip codes with at least 50 sales of single family homes and condos, not including multiple-parcel transactions, in both 2014 and 2015 were included in the analysis.