Author Topic: Effect of "Good" Schools on Price Growth?  (Read 1522 times)

Alenzia

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Effect of "Good" Schools on Price Growth?
« on: May 16, 2015, 09:48:32 AM »
When it comes to housing price growth, how do "good schools" affect it? I keep hearing that being near good schools means that your house price will grow faster, but that doesn't quite make sense to me - wouldn't the better schools be reflected in the price of the house without affecting the growth rate? Just trying to understand what affects how much the price of a house will grow, and what factors affect that the most.

jengod

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Re: Effect of "Good" Schools on Price Growth?
« Reply #1 on: May 17, 2015, 11:39:06 AM »
Matthew Effect: The rich get richer (faster) and the poor get poorer (faster).

It's an exponential virtuous or vicious cycle:

Good school attracts wealthier buyers, increase housing sale price, price-tied property taxes are higher, more money to fund ever better schools. Same wealthy buyers invest in the neighborhood and start/support businesses close to home, still more revenue for everybody. Revenue goes to more competitive teachers and more modern facilities, kids win awards and get into better colleges, publicity from "Winner High senior Edwin Smith gets perfect SAT score" generates even more attention both locally and across the ocean in emigrant communities. International buyers drive up home prices, transplant from other cities are told "just buy in Winner School District and you won't have to worry about Junior's education." Parents with disposable income donate it to the school district on top of their property taxes and still further improve the school relative to others by funding "extras" like TAs, music programs, etc.

MEANWHILE, every good thing that's happening in the prosperous school district is Oppositeland in the "bad school district." Bad publicity, less competitive teachers, fewer staff members and volunteers, more challenged students, more ELL students, dingier facilities. Up-and-coming young professionals with school-age children take off.

It's likely bad mojo for democracy but it does seem to be a real and pervasive situation.

Alenzia

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Re: Effect of "Good" Schools on Price Growth?
« Reply #2 on: May 18, 2015, 09:32:52 AM »
Thanks for the detailed explanation, jengod. I think the Matthew Effect is great at comparing "good" schools vs "bad" schools. What about when one district has schools that are mostly a 10 out of 10 and the other has schools that are mostly a 9 out of 10. Would there be a discernable spiral effect at that point?

jengod

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Re: Effect of "Good" Schools on Price Growth?
« Reply #3 on: May 19, 2015, 08:11:56 PM »
I would say 9 of 10 on greatschools is indistinguishable from 10 of 10. But beginning at about 7 of 10 or thereabouts there will be definite behavior shifts.