“Are the schools good?”

How far can you go into a conversation about home buying before getting to this question. Not far, I bet most any real estate agent or housing investor would say. And it’s easy to see why. Besides the obvious benefits of a good education, high-quality schools are inextricably linked to housing prices.

Just look at this chart, comparing Homeworthi’s public education attractiveness score* to average home values. As you can see, the better the education score, the higher the average home price.

But even with this clear connection between schools and housing, I think the “are the schools good?” question is becoming less useful - and less a predictor of housing - over time.

Why do I think this? Because of the erosion of the neighborhood school.

There is an increasingly large body of evidence showing that fewer and fewer kids go to their neighborhood public school. For example:

A lower proportion of kids are in public schools than ever before - per the Census, there’s been a drop in the percentage of school kids going to public school vs other schools. Up until a few years ago, more than 90% of all enrolled students went to public school. In 2022, that was down to 87%. It’s not a huge change on its own, but it is a dramatic change relative to the stable 90%+ figure for the years before. Plus, the biggest drop in public school enrollment proportions were in elementary schools. So as more high schoolers graduate, the overall percentage of kids attending their local public schools is likely to keep dropping. (It’s worth noting that some of the public school decline may be pandemic related, but there wasn’t any huge bounceback in 2022 that suggests this decline is temporary.)

A higher proportion of public schools kids are in charter schools than ever before - in 2012, only 3% of all public school kids were in charter schools – that number is over 7%, per the National Alliance for Public Charter Schools. Since charter schools are unlikely to be the neighborhood schools, this is another big drop in neighborhood school enrollment.

School choice is at an all-time high - according to the Hoover Institution (www.hoover.org), all 50 states now have at least 1 school choice program in place that allows for students to remain in public school but attend a school non-neighborhood school, whether that be through magnet schools, charter schools, or intradistrict choice. I fully expect that wasn’t true a decade ago, though I couldn’t find confirmation. With more school choice comes the reasonable assumption that more kids are going to schools outside their defined neighborhood boundaries.

So for all the time home buyers or housing investors spend fretting about a location’s neighborhood school, fewer and fewer of us are actually tied to that school. In theory, this should have implications for neighborhood home values.

And I think I’m seeing emerging evidence of that very thing.

There are two ways I would expect school attractiveness to show up in housing data: one is in population change, and the other is in price change. In both instances, public schools look to have no influence.

For population change, I looked at public school attendance in the 50 fastest growing counties in the U.S. with large enough child populations to make it worthwhile to include - so around 50,000 person counties or bigger. I compared the fast-growing group to the rest of the U.S., and to the 50 slowest-growing counties (all of which lost population).

There is essentially no difference between their current rates of public school attendance, or their changes in public school attendance in the past 5 years.

This was also true by city. So to the extent that schools would be a driver of growth, there isn’t a whole lot of evidence at the city or county level. I then compared counties again, this time using the Homeworthi public school attractiveness index. The assumption here is that communities with more attractive public schools should grow faster than communities with less attractive public schools. Instead, I found that counties with high attractiveness scores were no different than the overall national average in population growth. In fact low-scoring counties had the highest population growth!

Another way that schools may influence the housing market is in prices.

Homeworthi has public school attractiveness scores at the tract level, so we can do an even more precise evaluation of the neighborhood school impact on housing. However, I found no strong connection between school attractiveness and price change. I grouped neighborhoods by three tiers of school attractivenes: high, medium, and low-scoring neighborhoods. Each group had about the same change in price. In other words, price growth over the past 5 years has had almost no relationship to public school attractiveness, even though there was a clear connection between school attractiveness and housing price, as shown in the initial graph above.

So no matter what a neighborhood’s education score was, price change over the past 5 years was about the same.

Overall, this is a good bit of evidence suggesting that neighborhood schools mean less than they once did, and the trend is pointing to this continuing. This is a newly emerging pattern, and there may be other reasonable explanations for these findings, which is worth noting. But it’s certainly possible that the changing nature of the neighborhood school will have major implications for the future of housing prices in neighborhoods across the country.

* The public school attractiveness index attempts to identify the local importance of the neighborhood schools to its residents. This incorporates factors such as current public school attendance rates and trends, the proportions of school-age children, the rate of newly moved families with children, the per pupil investment in the local public school system, and expected public school attendance based on availably of private schools and major income thresholds (especially poverty rate).