House prices and incremental replacement
A friend who lives in Great Falls, Virginia, recently posed the question: Is there a premium for a house in the Langley High School district versus South Lakes High School? Langley High School is predominantly located in the mailing addresses of McLean and Great Falls, and the majority of the South Lakes High School District is within the Reston boundaries. This question has at its core the basic principle of “incremental substitution” that Thomas Sowell addressed in Basic Economics. In the home selection example, what can a homeowner give up for a lower price, or reverse if a higher price is paid for a certain part of an item of the home asset?
To try to determine if there is a statistical difference in value between these two schools, I prepared a Comparative Market Analysis of the Multiple Listing Service for all freestanding homes with sales prices of $ 500,000 to $ 1 million as of April 1, 2010 to date (August 4, 2010). I selected those houses that the listing agent identified as belonging to the Langley High School pyramid and then those that were included in the South Lakes High School pyramid. The data collected can be found below.
Langley High School: Median Sales Price $ 828,385; Median sale price $ 828,762; Average seller’s allowance: $ 1,537; Average selling price less seller’s subsidy: 826,848
Average days in market property: 62, median 20; 70 independent single-family homes were sold; Middle age 1974; Average lot size. 97 acres.
South Lakes High School: Median Sales Price $ 656,177; Average sale price $ 635,000; Average seller’s allowance: $ 3,970; Average selling price less seller’s subsidy: $ 652,207
Average days in market ownership 55, median 22; 61 independent single-family homes are sold; Middle age 1984; Average lot size: .47 acres.
This data shows that there is approximately a 26.2% price premium for Langley over South Lakes. It takes a few more days to sell at Langley’s pyramid, but that could have to do with the fact that it typically takes longer to sell a more expensive property, no matter where you are. Other factors that could come into play are that the average lot size is almost twice that of the Langley pyramid than the South Lakes pyramid, but the average age in South Lakes is ten years more recent than Langley’s. Selecting a high school that is the right place for a particular student to flourish is largely an individual decision. Langley is highly respected, ranked 47th in the December 9, 2009 issue of US News and World Report: America’s Best High Schools 2010: Gold Medal List. And South Lakes offers the renowned International Baccalaureate program. Fairfax County Public Schools are the 12 largest in the country and offer a variety of programs that help determine which school offers the educational environment that enriches each individual student’s experience.