We all want the best location, amenities, shopping, restaurants, cultural events and the convenience of local transportation. However, when a consumer buys a home, are schools also another variable that they consider as one of the most important factors in their decision-making?
It all depends on whether they have children, are going to have children or maybe not. Even for those who may not plan to have children or who no longer have children living at home like me, the best place to continue to increase your wealth when purchasing and keeping stability in values is in those school districts that are ranked the highest.
I have spent a multitude of years contemplating and pondering the reasons why people and families purchase homes, townhomes, condos, and coops. The main reason is to create a stepping stone to gain potential future wealth through ownership. According to the National Association of Realtors in a Jan. 7, 2022, article, “Homeownership is the largest source of wealth among families, with the median value of a primary residence worth about 10 times the median value of financial assets held by families. Housing wealth (home equity or net worth) gains are built up through price appreciation and by paying off one’s mortgage.”
At the national level, a homeowner who purchased a single-family existing home 10 years ago would have gained $225,000 in home equity if the home were sold at the median sales price of $363,100 in the third quarter of 2021. The gains of $193,600, or 86% of the increase, had come from price appreciation and principal payments of $31,300. Over that 10-year period, home prices have increased 7.9% annually, a stronger appreciation compared to the 4.2% annual price pace in the past 30 years. Our Long Island areas have seen even greater increases than the national average, due to those areas that have above-average schools.
Obviously, not everyone thinks about schools as the No. 1 reason to purchase a home. However, if you were to research and study where prices have appreciated the most (pre-pandemic and especially post-pandemic) the vast majority of families with children or those going to have them saw schools as the No. 1 factor in choosing a place to live.
In my professional opinion, I firmly believe this is the No. 1 reason for the greatest price appreciation over the long run. Education is generally the road to earning greater incomes and financial security for many who strived for greater opportunities and the path out of poverty. However, today it has become a more difficult challenge to seek out better schools due to the greatest increases in prices going back to 1967, according to the U.S. Bureau of Labor Statistics.
Comparing prices in 1967 with 2023, they have gone up 925.65% (a $925,650.30 difference in value). The cost of a $100,000 home in 1967 would be $1,025,650.30 in 2023 (56 years) for an equivalent purchase.
How can the vast majority of families who seek out an excellent education in a better school district afford to purchase if the prices are beyond their incomes? I believe this is one of the reasons why New York State has lost a portion of its population in the last 10 years to other lower-priced and taxed states. I do believe the answer is much greater government and public spending to prop up those schools that may need assistance in hiring more qualified administrators and higher salaries for teachers.
They could develop more comprehensive and stronger programs to elevate the grade point averages in math, science, and English. However, crime and parenting are other factors that will determine whether there will be a positive or negative effect and determine the outcome on students’ grades and academic future. This, in turn, will always have a tremendous effect and directly culminate in the value of housing prices in a town.
There is a direct correlation between housing prices and schools. The better the school district, the higher the prices. Even with a downturn in the economy, there are towns, like Great Neck, Port Washington, New Hyde Park, Herricks-Searingtown, Glen Head, Sea Cliff, Syosset, Jericho, Plainview, Bethpage, Ward Melville, Half Hollow Hills, Commack, and Dix Hills where prices may vary between school districts, but don’t generally decrease as they do in less than stellar school districts.
According to the National Bureau of Economic Research, each dollar spent towards schooling in a neighborhood results in a $20 appreciation in home values.Here is a link (clickable in this online version of my column) that further explains in depth and details the effect of schools on home prices: Comparing housing prices and schools
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Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. He has 40 years of experience in the Real Estate industry and has earned designations as a Graduate of the Realtor Institute (G.R.I.) and also as a Certified International Property Specialist (C.I.P.S) as well as the new “Green Industry” Certification for eco-friendly construction and upgrades. For a “FREE” 15-minute consultation, value analysis of your home, or to answer any of your questions or concerns he can be reached by cell: (516) 647-4289 or by email: [email protected] or via https://WWW.Li-RealEstate.Com Just email or snail mail (regular mail) him with your ideas or suggestions on future columns with your name, email and cell number and he will call or email you back.