December mortgage update: Should you really purchase a house in a good school district no matter what?

Last month (November):

Balance: $113,283.59
Years left: 9.833333333
P = $760.67, I =$453.64, Escrow = 726.93

This month (December):

Balance: $111,958.93
Years left: 9.666666667
P = $765.99, I =$448.41, Escrow = 726.93

One months savings from this month’s prepayment:  ~$2.22. They haven’t figured out that our escrow should be smaller yet… maybe next month.

Our house has lost 30K in value over the past year alone.

“They” say to purchase in a good district because those houses keep their value. Everyone wants to buy a house in a good school district.

If you have school-age kids that you’re sending to public schools, obviously you want a good district. Even if you’re not sending them to public schools you may want to live in a neighborhood with other school age kids in the neighborhood. (Not that neighborhood kids play together anymore, but you know, in theory.)

However, it’s not really clear that you need to live in a good school district if you don’t have school-aged kids.   A good school district costs something– it means a higher purchase price, which in turn lead to higher property taxes (because the house has higher value) for something you’re not getting a direct benefit for.

Of course, when you buy in a good school district, you’re also buying neighbors who care about housing values and/or about education… otherwise they wouldn’t have paid that extra premium to live in the good school district.

Unfortunately, school districts are not static.  They can change the district– if you’re in a bad district you can get a windfall… if you’re in a good district, you can get slammed.

Why did our house lose 30K in value this year?  Because they changed our school district.

Of course, the reason they were able to change our school district (forcing kids in our neighborhood to bus to a school that isn’t the closest or even the second closest school) is because we are a mixed-income neighborhood.  The truly rich neighborhoods they didn’t dream of switching schools on.  There would have been too much push-back.

So hey, at least our property tax should be going down this year.  But think all the money we would have saved if we just hadn’t bought in a good school district when we first moved here.  Though our property values would still be going strong if we’d bought our second choice house in the super wealthy neighborhood.  Of course, we’d be sending our kid to private school anyway because the publics won’t work with us until ze is older.  So we’d still be paying those extra property taxes for no good reason.

So should you keep school district in mind when you’re buying a house?  Well… sure, keep it as a factor, but don’t just use it as a heuristic.  There’s some monetary trade-off point where the school district just isn’t going to matter, and if you’re planning on being in the house for the long-haul, maybe it isn’t worth the extra property tax.  And if you’re in a lousy district to begin with, the only way for the schools to go is up.  So maybe buying in a bad school district isn’t the worst thing in the world.

Did you buy in a good school district?  Did you look at districts when you bought your house?

25 Responses to “December mortgage update: Should you really purchase a house in a good school district no matter what?”

  1. feMOMhist Says:

    well we bought before we had kids, and then we figured we’d go the private route, but with fMhson’s “issues” we need the services of a public school. That said sciDAD attended full on ghetto skool district but has Ivy Ph.D (as do his BFFs from said school) so he tends to be very dismissive of the idea that the key to academic success is a “good” district. Combine that with the fact that all the surrounding districts are MEH and we haven’t really considered moving for schools. Our district is OK. They aren’t awful (although standardized test scores are pretty low) and they aren’t great. The kids still get art and music and foreign language in elementary school which is important to me. Gifted education doesn’t start until grade 3 which annoys me, and then it is just a pull out, which kind of sucks, but then I’m not really sure what sort of school would be perfect for my kids so I don’t even know where I’d move to find such a place in our state.

    • nicoleandmaggie Says:

      In our area, the town with the lower SES is actually much better about working with parents and kids than the town with higher SES. The high test-score districts figure they’re doing well enough that they don’t need to make any special accommodations for kids who are different than the norm.

      I did Upward Bound in an inner city when I was in college and it was distressing how bad some of the teaching was. Very bright kids didn’t have a chance at going to top colleges. Our job was to teach them how to teach themselves and to get them into an open enrollment state university or community college where they could maybe transfer to a more selective state school after two years. Different parts of the country have different levels of how bad the schools can get.

    • Cloud Says:

      I’m sort of with sciDAD. My school district growing up was OK, not great, and I was in the lower income portion of it. Looking back, my K-12 education could have been a lot better. I was definitely behind the kids from the really good districts and the prep schools when I hit college (I went to the University of Chicago). But I caught up, and I also look back and figure I learned some important things outside the classroom in my K-12 years, so it is a wash. My husband had a similar experience, but in New Zealand. Of course, we know that schools matter- but we think that parents matter more, and that a mediocre school system probably won’t do serious harm for MOST kids. We figured if our kids ended up in the minority that were going to suffer in our school district, we could put them in private school.

      FWIW, I had a pull out gifted education- once a week, all the gifted kids got bused to one school for a special program. It was awesome, actually. They did great enriching activities with us.

      To answer the original question: we checked that schools weren’t dreadful when choosing where to buy, but schools weren’t our primary decision factor. We wanted to be not too far from work and in the coastal climate zone. Given our price range, that gave us about three neighborhoods to work with, and we ended up in one of those- and not even the one with the “best” schools.

    • scantee Says:

      I don’t think I would ever pay the premium for a very good school district. Absent any serious problems I would also not send my kids to private school. What makes a school good is different for every family: for some it’s test scores alone, others the sports/extracurricular offerings, special ed services, diversity, etc. For me, diversity is very important. I went to very homogenous schools and absolutely do not want that for my kids. I’m willing to sacrifice some test score achievement for that.

      We live in a large, urban school district, where the schools range from the very worst in the state to the very best. We have a neighborhood school that we’re guaranteed admission to and several other schools with lottery admissions that we can try and get into. On test scores alone our neighborhood school is terrible but we have friends with a daughter there and they love it and she is thriving. There is an open enrollment school that I love that has almost everything I want for my kids so fingers crossed on that one when the time comes. It helps that even though we’re in an urban district there aren’t really any safety issues. District-wide the teachers seem committed and educated, the facilities are well-kept, and there are a variety of programs that specialize in the needs of both special ed and smart kids.

  2. Kellen Says:

    In Atlanta, the schools are so bad that it seems you pay a premium to live in some neighborhoods just because they’re close to a good private school. But your public school district is still not so good. (At least, in the city limits, and as far as I know.)

    • nicoleandmaggie Says:

      It’s weird how some cities have amazing public schools and some are just terrible and you either have to go private or suburbs. I know there’s a literature on the causes, but I’m not really up on it, other than the part that relates to race, housing discrimination, and white flight.

  3. Linda Says:

    I don’t have kids so the school district never considered when my ex and I bought the house 10 years ago. The value has dropped significantly in the last couple years just due to the market in Chicago. The house was assessed by the bank in December 2008 so I could get my own mortgage and buy him out. At the time it was assessed at about $65,000 more than we had bought it for. (Of course some of that was due to principle we’d paid over seven years, but most of it was just market value increase.) I had the house re-assessed in December 2010 so I could refinance to a lower rate; at that time it was assessed at $35,000 lower than it had been the year before. Considering that I had just finished a kitchen remodel which added new appliances (but wasn’t over the top for the neighborhood or anything), I was disappointed to say the least. But I wasn’t upset since the assessed value was still $30,000 higher than we had originally bought it for in 2001 and I had changed the kitchen for myself, anyway. Last month I tried to refinance again since the rates have dropped even more. I was denied. Not due to my credit (which is excellent) but because the equity in my house had dropped to less than 20%. This was entirely market effect since the house was assessed last month at $50,000 less than it had been at this time last year. Wow. If I had waited until now to get divorced I would have over $40,000 more in my savings. I console myself that the bank’s assessed value is going to be less than the house would actually sell for. I hope so. It makes me wonder why I pay about $300 extra on the mortgage each month.

  4. becca Says:

    All the schools in my current town are decent, but I did note that of the schools, I happen to be in the area for the one elementary school that has disproportionately bad outcome for minorities. So that’s depressing. Granted, the Ns are so small in this town I doubt it’s relevant (but that’s still depressing in a different way).
    Where ever we end up, what the schools are like will be a pretty big factor in where we live because of the kidlet, but test scores are probably only going to be part of the equation (badmomgoodmom has some awesome posts on standardized testing and how to evaluate school districts, e.g. Living close enough to walk to a “good but not exceptional” school is better than having an hour bus ride to an exceptional school- although picking based on proximity is risky too (my parents tried that. They closed the school a stone’s throw away, and the one that was < 1 mile was burned down when I was in 1st grade. Buses for me. Given the amount of bullying on the bus, this was probably a crucial factor in my development, though I'd never thought about it overmuch till now. Though it's also nicely parallel to "people tend to buy bigger houses in the suburbs, thinking the commute won't bother them much. This is a terrible decision for happiness maximizing" stuff I've read).
    If it weren't for the kidlet… I don't know. I'd like to think I'd pay the extra taxes for a "good" school vs. a "lousy" school (not necessarily "great" over "good" though), on the general principle that it's worth paying for.

    • nicoleandmaggie Says:

      Our previous school district was low SES, high test scores. So pretty amazing. Our current school district is low SES, low test scores. They moved us (an upper-middle-class HOA) from a lower 50s% poverty rate district to a higher 50s% poverty rate district in order to equalize the two districts… while not touching the 20-30% poverty rate districts where the rich peoples live. The sad thing is that a big part of the reason the low SES district was doing so well was because of the strong volunteer ties that had been built up over the years… which were broken when the school board decided to make this change.

      I could continue complaining about short-sighted school boards not understanding mechanisms and general equilibrium effects…

      • Rumpus Says:

        This semester I keep seeing areas of bad management causing huge amounts of dis-utility. As an engineer I just want to solve the problem…but there isn’t time to solve everything. It’s saddening to think how little problem-solving and critical thinking people get in schools, but now I find myself wishing that people got some management skills in school too.

      • Rumpus Says:

        Dis-utility leads to frustration. Frustration leads to involvement. Involvement leads to management. Management leads to governance. Government…it’s like the Dark Side?

  5. First gen american Says:

    I live in a lousy school district. We bought before we were married or knew we would have kids. I figured it was a minimum of 10 years before I had to worry about it and I’d prefer to pay for less house for that decade vs paying more before we needed the services. So in summary, I just figured we’d move if we had to. I think that’s probably still the plan by middle school. I am also keeping a pulse on what’s going on with the volunteer work I do. If things get better we may stay.

  6. chacha1 Says:

    I’m not planning to buy a house until retirement, and am childless anyway, so school districts are pretty much the last thing I look at when I am perusing Yahoo Real Estate and thinking expensive thoughts. I look at, can I get at least a half-acre lot, and is it free of HOAs and ridiculous municipal limitations on new green technology.

    Growing up, I went to a colossally crappy rural elementary & middle school and a just-as-crappy county high school. This was in the South, where a single high-school football season can define a life. I got a decent education anyway due to a home with a culture of reading.

  7. Debbie M Says:

    I was looking for only four things: 1) affordable to me, 2) solid foundation, 3) convenient to the university where I work, 4) big living room. For dancing! I was single and figured that whoever i’d marry would want to live somewhere nicer and so I would rent out my place to college students. Turns out my guy can’t afford anywhere nicer and turns out it’s nice enough for both of us anyway. My school district is pretty bad (some low SES, many students still learning English–my neighborhood is mostly retired middle-class white people who bought the houses new back in the ’50s, Hispanic families in starter homes, and gay couples–one of those groups has way more school-aged kids than the others). I like being in a school district that can really use my tutoring services when I retire.

    The one thing I’ve learned is that ANYTHING can change. Here is what has changed for me in the last 15 years:
    * They took out the closest freeway entrance and exit ramps for safety purposes (boo!)
    * The Montgomery Wards closed and a Target moved in (yea!)
    * They moved the airport (boo and yea–less noise, but now I can’t just walk home from the airport when the buses aren’t running, which they never are because I always get home late on a Sunday)
    * They built hiking trails, restaurants, and an Old Navy and Best Buy in the old airport, moved a Home Depot there, and are going to build a grocery store (yea!)
    * They tore out part of the road to my house so they could put the Home Depot there (boo!)
    * They moved the library (yea and boo–it’s a little farther away but bigger)
    * They took too long to repair our pool and finally had to close it (boo!)

    If they ever make an HOA, I’m leaving.

    Another interesting thing that happened (though not to me) is that Oklahoma became earthquake territory (not just tornado territory). Similarly, Texas became a place where companies don’t want to provide homeowner’s insurance (mild issues, flooding after hurricanes, etc.)

    All you can do is check the current restrictions, read the news, and do the best you can.

  8. CG Says:

    Super-long comment, but I feel pretty strongly about this! When we and many of our friends were getting married and buying houses seven or eight years ago, we decided to buy a very small house in a very good school district, which in our area happens to be the central city. Some of our friends bought larger houses further away from the central city in a truly terrible school district. We all figured by the time we had kids we would move to a bigger house (us) or to a better school district (them).

    Fast forward to now. Prices in our central city declined about 20% during the bursting of the housing bubble (we are in a state that was very hard-hit and this was actually not too bad for our region). We stayed in our tiny house until we had our second baby, then sold at a loss and rented for a year, then bought the house we were renting. We certainly lost money on our first, relatively inexpensive house, but so did the people that we bought our second, much more expensive, house from. So all in all it turned out okay for us. Our friends, on the other hand, in the bad school district? Prices declined much more steeply there. They are all underwater on their mortgages, can’t refinance, and can’t move. Some of them now have kids that are close to kindergarten age and they are stuck in that school district. They will either have to send their kid to a crappy school, let the bank foreclose on their house, try to sell it at a loss and try to recover from that financially, or pay for private school.

    So, the point of all this is that if you think you might someday have kids and that you might want to send them to a public school, I would pay more for less house if I had to in order to get in a good school district. Mobility when you need it later is not guaranteed. Also, in our area, prices in the good school districts held up better, although I’m sure there are examples out there where that is not the case.

  9. Finance links round-up « Leigh's Financial Journey Says:

    […] discuss whether you should buy a house in a good school district no matter what. I don’t plan on having kids in the next 5-7 years, so this isn’t a factor in my […]

  10. pvcccourses Says:

    Depends on a) the neighborhood and b) your disposable income.

    Schools here in lovely uptown Phoenix are about as splendid as Kellen describes them in Atlanta. Until the crash, people followed the white flight to ever-more-far-flung suburbs, where the quality school lasted about as long as the Styrofoam-and-stucco house (a tract house is considered “old” at 12 or 15 years). Since the market collapsed, however, those places have turned into ghost tracts, with vacant malls and haunted schools, so parents have little recourse but to home-school or put their kids in private schools.

    People who can afford private schools buy in the few centrally located upscale and middle-class areas, where homes have lost value much less than those in the suburbs. No one wants to commute over the homicidal streets of Phoenix, and those who can afford not to do not. I suppose that translates, in a back-handed way, to “holds value.”

    Additionally, a few “historic” districts have gentrified. These areas, which consist mostly of cute but very small homes, are occupied by DINKs, singletons, and gay couples. Residents either don’t have children or they earn enough to put the kids in private schools.

    Schools in some upscale districts (such as Scottsdale) are vaguely better than others, but not really. On the college level, I teach the products of these districts’ high schools, and I can assure you…it’s not pretty. So, no. I would not pay more to get into a better school district, not around here. I’d buy a pleasing house as close to work as possible and then put my kids in private or charter schools.

  11. The Frost Is on the Palm Tree | Funny about Money Says:

    […] Nicole and Maggie want to know: Would you pay more to live in a good school district? […]

  12. Janette Says:

    Pvcccourses- you should look at Madison schools :>)

    After spending four years on the road teaching teachers about product I found:
    there is a HUGE difference between public schools in the US- even a school four blocks away can be worse than the other simply by having good leadership,
    many private schools and rural public schools get about the same results- relationships matter,
    the great divide in education is scary- and getting worse,
    “exploratory” math, whole language and well meaning professors do not know the first thing about teaching basics to most children,
    and last
    if we are going to compare ourselves with Chinese education- then we should insist on them putting their very lowest and very highest students in the same classroom for a year and THEN testing them.
    Our school systems started going under when we insisted that every child receives the education for the lowest child in the room. Harsh (and I am a special ed teacher), but true. What did one of the posters say, “Would have sent my child to private school, but only public offered the services.”
    Saying that, it is sad that your district changed boundaries. I would go to the board with a huge petition and ask that the boundaries be re established. Otherwise, become Catholic for a medium priced education. That is what my daughter is doing!

    • nicoleandmaggie Says:

      Our entire HOA was up in arms, but it didn’t make a difference. That’s the problem with being mid-income instead of high-income. Regardless we’re going private for the time being. School isn’t that much more expensive than the local Catholic.

  13. Janette Says:

    Sorry-* bad leadership at a worse school.

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