Year: 2005

I was asked a simple question the other day – “Do better schools increase property value?” I can’t answer the question as asked because it’s somewhat of a “which came first, the chicken or the egg” question. Let me explain.

Looking at the Austin ISD list of school ratings, it’s clear at a glance that the most highly rated schools, the “Exemplary” schools, are located in areas where real estate prices are higher. I have confirmed this with MLS analysis, which I will share below. So, if the question were “Does it cost more to buy a home that attends an exemplary school?”, the answer is very much a “yes”.

But which came first?…the more expensive homes or the more desirable schools? In other words, do good schools affect real estate values by enhancing the desirability of a given area, or do the children of people who live in more expensive homes perform better academically, such that the school is able to achieve a higher rating? The best way to determine this will be to compare sales data with homes in the same areas that are as much alike as possible, except for the schools. Read on to see the results.

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Buyers often ask me about small towns surrounding Austin, such as Kyle, Manor and Hutto, where new homes can be purchased much cheaper than in Austin. Investors and first time buyers have flocked to these areas and purchased many of the homes sold there in the past 4 years, and continue to do so because of the better prices.

I’ve never personally, as an investor, liked these areas simply because it’s hard to know what they will be like in 5 or 10 years from now. I’d rather buy a beat up duplex close to downtown. I believe many of the small outlying areas are over-sold to investors and that they are also over-sold first time buyers (who are really, as far as how they take care of their homes, renters now making a mortgage payment). If you’ve read my investment page on this website, I touch on that in outlining the pros and cons of buying existing homes in established areas versus buying new homes in newly populated outskirt areas. It’s somewhat a roll of the dice, in my opinion, buying in some of “starter home” areas.

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