What’s a School District Worth? An Economic Perspective

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Several years ago, we did an analysis to predict which zip codes would have the fastest return to pre-recession levels for single-family homes. That analysis looked at all 90 zip codes in San Diego County. The results indicated that the higher the SATs for the high schools serving the zip code, the faster the recovery.

At that time, the zip code with the highest SAT scores was 92130, which is the Carmel Valley community served by the San Dieguito High School District. In fact, its home prices were the first to bounce back to pre-recession levels and continue to rise.

This time, we looked at the zip codes and SAT scores for selected school districts to ascertain whether there is a direct correlation between SAT scores and the price-per-square foot of single-family home resales. We focused on districts north of Interstate 8 since the neighborhoods to the south are experiencing strong demographic shifts, especially with construction near the border and in downtown San Diego.

The latest SAT data we were able to acquire was from pre-2016, which was based on a 2,400-point system. The new SAT is now back to the 1,600-point system and changed both the material and way it is scored, plus the essay as optional (for those who want to get into the UC System).

We found, once again, a strong correlation between SAT scores and prices-per-square-foot. Additionally, the San Dieguito High School District had the highest SAT scores (at 1,818) and the highest price-per-square-foot for resales ($499).

As we move inland, the SAT scores decline along with the average price-per-square foot. It’s almost a perfect correlation.

SAT scores 1

At the bottom of the list was Orange Glen High School in Escondido, with an average SAT score of 1,332 and average price-per-square-foot of $283.

We also looked at the same high schools to see how they fared compared to the statewide standardized testing for English, math and science. Our exhibit displays the data, where the the percentage of students in the met or exceeded state standards categories are plotted across the school districts. As with the SAT scores, there is a similar strong correlation in the home prices and student performance, especially in math.

Per Square Foot

(This data is public and comes from the California Board of Education. Type in “SARC scores” where every school is listed.)

For families looking for a nice house in a good school district at a fairly reasonable price, it appears that Westview and Rancho Bernardo are strong candidates. But, the real bargains are Grossmont and El Capitan, with perfectly decent SAT scores and bargain basement prices for housing; you’ll just need to supplement your child’s math and science education with Khan Academy or tutoring. Overall, it is our contention that good schools and good zip codes mean strong home prices.

As an aside, the State of Colorado has begun an intense analysis to see what it would take to make Colorado the best school system in the United States. They are dead serious about it. Perhaps California should keep track of the Colorado project. This past year, Education Week Research ranked California in the bottom 15 of the 50 states (with a grade of C-), right down there with Arkansas and West Virginia.

Finally, in a recent issue of Atlantic Magazine, author Matthew Stewart discussed the importance of zip codes. He stated: “[Our] zip code is who we are. It defines our style, announces our values, establishes our status, preserves our wealth and allows us to pass it along to our children.”

Additional economic and market research articles by Alan Nevin can be found here.

Topics: Economics, Real Estate Development, Alan Nevin, San Diego


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