Fewer Foreclosures Near Top Public Schools

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Fewer foreclosures are found in neighborhoods with good public schools.

A new analysis of foreclosures shows that the expression “safe as houses” could be expanded to “safe as houses in a really great school district.”As reported by the Wall Street Journal‘s Matthew Strozier, a look at six months of foreclosure data shows that as the quality of a public school district goes up, the incidence of foreclosure goes down.

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The analysis was provided by Location Inc., a Worcester, Mass. provider of place-based data to corporations and looked at five metro areas across the country — Atlanta, Seattle, Toledo, Jacksonville, Fla., and Stockton, Calif.

Stockton is a foreclosure epicenter, ranking fourth on a list of the top 10 markets with the highest rates of foreclosure as of mid-year 2011, according to data provider RealtyTrac.

Atlanta and its surroundings were 16th on the list, while Seattle was 57. According to RealtyTrac, more than 1 million homes nationwide received some kind of foreclosure filing in the first half of 2011.

The Location Inc., analysis found that what might be called the “district effect” held for all five cities surveyed. Since better school districts were found to have higher home prices per square foot, it’s possible that they suffer fewer foreclosures because they have attracted richer buyers in the first place.

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But it’s also possible that during the current market slump, homes in good school districts are holding their value relatively well, convincing homeowners there who might otherwise consider defaulting to continue making payments. In fact, University of Cincinnati economist David Brasington has written that housing prices are more responsive to changes in public school quality than to changes in other variables like commuting distance or racial makeup.

Homeowners in weaker school districts, on the other hand, may be more inclined to throw in the towel after seeing their home values decline and even fall below what they owe on their mortgage. Homeowners with such “upside-down” mortgages are more likely to default.

Regardless of the mechanism, the report might raise the value of school districts in some buyers’ minds, even if those buyers do not have school-aged children.

Currently, school quality is a factor for one in every four homebuyers, according to statistics from the National Association of Realtors.

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