RealtyTrac: Average Earners May Be Priced Out of Zip Codes with Good Schools

IRVINE, CA—Well more than half of all zip codes that include one good school are in places that are unaffordable to the average worker. This according to a new report from RealtyTrac.

The unaffordable designation means that wage earners would have to spend more than one-third of their income to buy a median-priced home.

Those metro areas with the most unaffordable zip codes with good schools were Los Angeles (184), New York (158), San Francisco (77), Chicago (58) and San Diego (49).

Metro areas with the most affordable zip codes with good schools were Chicago (179), Detroit (44), Phoenix (22), Miami (20) and Charlotte (18).

Out of 1,823 zip codes with at least one good school, 1,181 (65%) were unaffordable for average wage earners. In zip codes with at least one good school, the median home price was nearly double the median home price in zip codes with no good schools.

The median sales price in 2015 for homes in zips with good schools was $411,573 on average, 95% higher than the median home sales price in zip codes without any good schools ($210,662).

"Neighborhoods with the ideal combination of good schools and relatively affordable home prices are very competitive for buyers," said Lydia Creasy, associate broker with RE/MAX Alliance, covering the Denver market. "At the very least, buyers in these markets need to be pro-active and act quickly as soon as a new home hits the market, and in some cases buyers in these neighborhoods have either had to settle for a less-updated or smaller home or increase their price range."

South Florida has a unique combination of factors that helped put Miami high on the affordability list.

"Over the past decade there has been a focus on improving the South Florida public education system and we are seeing great results," said Mike Pappas, CEO and president of the Keyes Company, covering the South Florida market.  "The Miami-Dade County public school system was awarded the prestigious Broad Prize by The Eli and Edythe Broad Foundation in 2012 for the most improved urban school system,' with neighboring Palm Beach County public schools as the runner up. Our overall median price for South Florida real estate is 20 – 30% lower than other major U.S. cities. This combination gives South Florida homeowners many good options to find good schools in affordable neighborhoods."

With RealtyTrac's methodology, school data comes from each state's Department of Education in 2014. Test scores are based around the test average of each state with the state average being a score of 1.  The higher above the state average the school is, the higher the grade. Median price data is from publicly recorded sales deeds and mortgages for single family homes and condos. In some states known as non-disclosure states where the sales price is not required on the sales deed RealtyTrac used loan amounts and estimated property value at time of sale instead of the sale price.

Average wage data came from the Bureau of Labor Statistics and was from the first quarter of 2015, the most recent available. Affordability was calculated based on the percentage of average wages to make monthly house payments on a median priced home, assuming a 10% down payment and 3.80% interest rate based on Freddie Mac data. Only zip codes with at least 50 sales of single family homes and condos, not including multiple-parcel transactions, in both 2014 and 2015 were included in the analysis.