Economic Perspective: School Quality and Home Values

NC State College of Agriculture and Life Sciences professor Dr. Mike Walden working in a recording studio.

MARY WALDEN:

“Today’s program looks at school quality and home prices. Mike, parents want their children to attend good schools. One way this may be revealed is by parents being willing to pay more for homes in school districts where school performance is better. Is there any evidence this happens?”

MIKE WALDEN:

“There actually is. Over the years there have been many, many studies that have looked at the relationship between home values in a school district and the quality, usually measured by test scores, of that school district. And those studies, and I’ve done some of them, do find a link. They find that holding everything else constant, as the quality of a school goes up, in terms of primarily being measured by performance of kids on standardized tests, home values go up.”

“And again, that makes sense because parents usually, or many of whom are buying homes, want better schools for their children. We have a new study to add to the list. It’s based on work in Tennessee using Tennessee data from school districts in that state. They used a state-wide testing measure as their measure of school quality.”

“In terms of home value, and this can be tricky, they followed the same homes over time. That’s usually the preferred way of looking at this, so-called repeat sales. You look at the impact on home values. And like pretty much all the other studies, they again found a link between home values and school quality. Again as the test scores on the standardized tests in Tennessee went up for the children in particular school, again controlling for size, number of bedrooms et cetera so that’s all taken into account, they did find that home values did indeed go up.”

“And interestingly this is home values not just for families with children buying homes, this is home values for individuals or couples who have no children. So the quality of schools matters not just for the children, but it also matters for the surrounding economy in that school district.”

Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agricultural and Resource Economics who teaches and writes on personal finance, economic outlook, and public policy.

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