When looking for new homes, savvy buyers almost always research the quality and proximity of nearby public schools. Even DINKs and single purchasers look at the school system with the belief that it will impact the value of their housing investment.
Mitchell Livy, associate professor of economics at Cal State Fullerton’s College of Business and Economics, recently examined the impact of new school openings on property values in his study, “Days and Confused: Housing Price and Liquidity Response to New Local Public Schools,” which appeared in the Journal of Real Estate Research, co-authored with Nicholas Irwin of the University of Nevada, Las Vegas.
“In this study, we estimated the influence of the opening of new elementary schools on nearby housing prices and liquidity. We found that both measures are positively impacted when a home is zoned for a new school, even though it is of unknown quality,” says Livy. “This research is unique in the real estate and amenity valuation literatures because we jointly estimate the price and liquidity changes resulting from the introduction of new schools.”
Livy and Irwin discovered that the sales price of homes within the area served by the new school increased by 2.4%. But perhaps even more significantly, the length of time homes were on the market declined by 48 days, suggesting that while new school openings will modestly boost home values, they may certainly make it easier to sell.
“This research improves understanding of the housing market and can inform policymakers. A home is a substantial expense and frequently a large portion of a households’ net worth,” says Livy. “Given the impact of new or changing amenities on housing prices and liquidity, it is important for policymakers to consider overall policy impacts.”