Aside from its location, a neighborhood has many public assets that combine to determine its desirability to buyers, including schools, parks, transit, retail districts and hospitals, to name a few. How do those assets affect home prices — and which ones have the biggest impact?
Conventional wisdom holds that the strength of a community’s school district exerts a major influence on its home values by making it more attractive to buyers with young children. While that remains true, agents say, buyers are now broadening their definition of what makes a good school system — and putting a premium on other assets, as well.
‘They’re actually buying the school district’
“Historically, it’s always been that the communities with the perceived better school systems tend to hold their value better,” says Gerry Bourgeois, project manager with Lamacchia Realty outside of Boston. “Even in a flat or down market, those towns tend to weather the storm better.”
There’s plenty of evidence of that in the Boston area. The median price of a single-family home in Lexington, Massachusetts — whose high school is among the top-ranked in the state by U.S. News & World Report and by Niche.com — more than doubled between 2006 and 2021, from $697,500 to $1.47 million, according to real estate analytics firm The Warren Group. Prices in Lexington actually rose slightly between 2006 and 2011, even as they fell nationally and statewide.
It’s likely those resilient and fast-rising home values aren’t due solely to the school system; Lexington is a leafy suburb with charming, sidewalk-lined neighborhoods very near to Boston (where home values also largely held their ground during the Great Recession). It has other key assets, too, including a historic town common, commuter rail service and highway access, and a walkable downtown area with shops and restaurants.
But many buyers with children are understandably concerned with their kids’ education and willing to take out a bigger mortgage if it means getting a private school-caliber education in the local public schools. Others even become obsessive about a school system’s reputation and whether it feeds students to Ivy League colleges.
In Roslyn, New York, a Long Island suburb of New York City, a shocking number of residents initially looked the other way as the superintendent who led the school district to national acclaim (boosting home values in the process) 3. The superintendent, upon whom the 2019 film “Bad Education” is based, was able to stave off scrutiny by warning of the impact an investigation would have on the school district’s reputation.
It’s not as though Realtors are steering clients toward these towns, Bourgeois says — indeed, that would be illegal. But some buyers are laser-focused on rankings and already dead set on a certain school district. “They’re not going to be swayed into going to another town because they can find more value,” he says, “because that’s secondary — they’re actually buying the school district.”
Redefining ‘good schools’
The obsession over school rankings has subsided in recent years, says Grace Goro Kaage, managing director with Compass in Chicago. Part of that has to do with low inventory: Buyers know they simply have to be more flexible in this market, she says. But it also reflects a broader understanding of what really makes a good school.
“A lot of what we see is actually parents gravitating towards a school not just because it’s the all-encompassing, quote-unquote ‘great school,’ but because it speaks to whatever they prioritize and value the most,” Kaage says. “There are certain schools where parents feel that the academics are amazing. Some of them have incredible sports programs. Others are really well known for the arts.”
Indeed, what works for one family or student doesn’t always work for another, Bourgeois says, so he doesn’t like using the word “better” to describe school districts. Friends of his sent their two daughters through the same school system, with very different results. “One had a great experience, one had a terrible experience,” he says.
Plus, school rating sites tend to focus heavily on average test scores, which often say more about who’s at a school than whether the education offered there is a rigorous, supportive one. Test scores reflect things learned both inside and outside of school, so kids from advantaged (typically whiter and wealthier) backgrounds tend to score higher.
A team of researchers at Stanford University, led by Sean Reardon, professor of poverty and inequality in education, has spent years studying the achievement gap in America to develop the Educational Opportunity Project — which maps out not just test scores, but also academic growth rates, in thousands of communities around the country.
To do that, Reardon compared test scores from the same cohorts of students over time. A school with above-average eighth grade test scores, for example, seems good … but if those same kids had excellent scores in the third grade, what does that say about the intervening five years of education? Meanwhile, kids at some lower-income schools may start out a bit behind, but end up learning six years of material in five school years, showing outstanding progress.
In Lexington, the hype appears warranted: While its students enter school with socioeconomic advantages that boost their early test scores, they continue to grow academically, learning 36.5% more in each grade than the national average.
At a certain point, though, whether or not the Lexington schools offer more opportunity than another town’s is almost beside the point. Because once a town gains a reputation for quality schools, it becomes something of a “self-fulfilling prophecy,” Bourgeois says.
“The parents who are focused on their children’s education are going to seek out these school districts, and if you have parents who are invested in their child’s education, then of course they’re going to do better,” he says, because of their familial support system. “So, it’s sort of a self-perpetuating thing.”
One in every four homebuyers in 2021 was an older millennial, aged 32 to 41, according to the National Association of REALTORS®’ 2022 Generational Trends report, and 40% of them said the quality of the school system was an important factor in choosing a neighborhood. But most boomers (aged 57-75), who were responsible for 29% of home sales last year, couldn’t care less about the quality of the local school system. Older boomers, especially, were more concerned with being close to friends and family, shopping and health facilities.
“Generally speaking, when we’re talking about all of these [neighborhood assets], we’re talking about quality of life for the buyer. It might be school districts for one buyer, it could be recreation or restaurants for another,” Kaage says.
“After being isolated for two years, people just want the places that they live to inspire connectivity, to inspire love and a sense of community around them,” she adds. “So, all of these things like parks, recreation, community events, festivals, are more important than ever. A lively, vibrant community, I think, appeals to any generation, regardless of what life stage you’re in.”
Oriana Lehman Wood, an agent with Russ Lyon Sotheby’s International Realty in Scottsdale, Arizona, agrees. More than schools or hospitals, she says, the two things everyone wants from a neighborhood are the chance to feel part of a community and to feel safe in that community.
“Those two factors really enhance and influence neighborhood value and draw people of all kinds, of any generation,” she says. “Everybody really has this basic human need of wanting a place to gather, wanting to feel local, wanting to feel accepted and welcomed, but also wanting someplace to commune, to visit with people. It’s almost that European piazza effect.”
Kaage says Chicago neighborhoods like Logan Square and Wicker Park have been bursting with activity around weekend farmers markets. “That’s just one small example of the type of amenities that a neighborhood can have that maybe you don’t think of off the top of your head,” she says. “But when you buy a place, and two blocks away from it is a farmers market where you can get your groceries every Sunday, that starts to matter to you, and that’s where you start to build your relationships and your connections.”
In that sense, such an asset isn’t just about the presence of a park itself, she stresses — it’s what’s happening in the park, and the support it receives from the community.
“I think sometimes what goes overlooked is not just the park itself, but what is the chamber or city actually doing with the park?” she says. “Because once you move into a neighborhood and you get used to the movies in the park that happen, or the farmers markets or the public sports games that go on there, all of these things that create that sense of community, that’s actually where the value is — it’s not just the park.”
Across nearly all age groups in the NAR report, buyers expressed a desire for walkability and for access to recreation, entertainment and shopping.
“We place a really big value on local restaurants,” Lehman Wood says, citing a pair of beloved community eateries — La Grande Orange Grocery and Postino — that directly influenced the desirability of nearby real estate. “They actually changed an entire neighborhood,” she says.
“You would find agents like myself marketing our properties in those neighborhoods as ‘walking distance to LGO, walking distance to Postino,’” she adds. “Things of that nature play a big effect on enhancing a property’s value — but more so really enhancing a community’s value. Because there’s just this natural place to gather on a regular basis and feel like you’re a part of something bigger than you.”
In a city like Seattle, where driving and parking can be a hassle, “Being walkable to things is what everybody wants,” says Roy Powell, a Realtor with Team Diva at Coldwell Banker Bain in Seattle. There’s an old joke, he says, that it takes an hour to get from Seattle to Seattle, “because our traffic is stupid-stupid.” People want to be able to walk to a grocery store, a bar and a coffee shop, he says, or they want to know where those things are on their route to work.
Many Seattle neighborhoods were originally separate towns that the city annexed, Powell says, so they have their own commercial areas to walk to. And in a city with good transit, people gain an expanded notion of what’s considered walkable. “If wherever you’re going is near a light rail station, your walkability becomes the block from your front door to the train, and then the train ride there,” Powell adds.
Speaking of which, a lot of Seattle buyers also want to live close to transit, Powell says, which typically means the north-south corridor along the light rail system. Bus routes can change, Powell says, and, as happened during the pandemic, service can be scaled back dramatically. “But with the light rail, at least you know if your house is 0.2 miles from a light rail station, it will always be 0.2 miles from that light rail station.”
Geography as an asset
However, the priciest neighborhoods in Seattle aren’t always those on the light rail, he adds. Seattle is known for its water and hills, which can shape not just a neighborhood’s landscape, but also its desirability.
In the high-priced, hilltop ’hoods of Magnolia and Queen Anne along Elliott Bay, Powell says, “Views are a big part of the expense.” Meanwhile, Ballard has become popular for the very opposite reason: because it’s mostly flat. “It’s becoming more and more expensive because of its walkability, and because you can jump on a beach cruiser and ride 25 blocks to something,” he says. “And that feels a lot closer than if you were to ride across town.”
In a way, it all comes down to — what else? — location. For whether it’s a community hot spot, a popular hiking trail or a favorite golf course, Lehman Wood says, a neighborhood asset doesn’t necessarily have to be within walking distance for all buyers. But it does need to feel accessible to be appreciated. “It has to be something that is truly within reach, however you define that,” Lehman Wood says.