Home buyers with expanding families aren't just looking for houses, they're looking for cities and neighborhoods with good schools for their children to attend. High-quality schools and high property values go hand-in-hand because once word gets out about the schools, the demand for homes in that school district can generate an increase in property values.

With most U.S. schools funded by state and local property taxes, living in an expensive area usually means higher property taxes that generate more money for the local schools. That means the per-student costs can differ greatly within that area, with schools in the expensive neighborhoods receiving more money for faculty, facilities and classroom supplies. Bottom line: Great schools boost property values, and high property values boost school quality.

So how can you help buyers find the right home in the best school district they can afford? Zillow Group® CEO Spencer Rascoff and Chief Economist Stan Humphries, authors of "Zillow Talk: The New Rules of Real Estate," came up with a way. They combined Zillow housing data with school ratings data from GreatSchools - a national leader in providing school performance data to parents - to establish a school parity number: A rating that defines the strength of the relationship between home values and school quality.

School parity

New Mexico, New York, South Carolina, Virginia and Minnesota are the top five states with the greatest school parity between home values and school quality. In other words, if you live in one of those states and one of your listings is in the bottom 10 percent of home values across the state, the quality of schools in its neighborhood is pretty close to the quality of schools in the state's more expensive neighborhoods.

States with the least school parity are Michigan, Pennsylvania, Ohio, Georgia and Tennessee. These states show the strongest relationship between home values and school quality. For example, Michigan homeowners in the bottom 10 percent of home values experience schools that rank an extremely low 2.1 on GreatSchools' 1-10 scale. However, more affluent neighborhoods in Michigan enjoy schools that rate as high as 9.2.

Moving up in school quality

School parity increases with higher home values and school quality. For example, if a homeowner in Pennsylvania wanted to move from a GreatSchools rating of 5 to a school rated at 6, they would expect to pay about 15.4 percent more for a home where that 6-ranking school is located. Moving from an 8 to a 9 would require that homeowner to pay 60.1 percent more for their next home.

This means going from an average school district to a slightly better one doesn't cost very much (15.4 percent more in home values), but going from a great school district to an excellent one costs and arm and a leg (60.1 percent more).

The good news is that on the lower end of school quality, homeowners can "trade up" to slightly better schools for a reasonable increase in home prices. The other bit of good news is that chichi neighborhoods aren't the only places to find excellent schools. Many affordable homes fall into the attendance zones of above-average schools - but without the above-market prices. Look at the schools in your area and compare the good ones with surrounding home prices.

Finding the best school districts that your clients can afford to live near is half the equation. The other half is to showcase your local real estate expertise by identifying the right homes and neighborhoods for your clients within their desired school district. Using data and doing a little bit of homework to present more complete home and school "package" options can put you at the head of the class.

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