Good Schools equal Property Value and Stability

Palos Verdes Peninsula Unified and our excellent South Bay Beach Cities school districts failed to get a shout-out in this article, but we all know the significance of good schools and their correlation to property value and stability…

Good Schools, Bad Real Estate
Despite the housing slump, house hunting in good school districts frustrates parents who often have to settle for less house.

The Wall Street Journal
June 25, 2010 by Sarah Max

Oh, the sacrifices parents make.

Kiely and John Adams began their house hunt this spring with grand plans to upgrade from their small home in Cary, N.C., to a larger, four-bedroom house—preferably with an office and a bonus room—about 25 miles away in Chapel Hill, where Kiely plans on starting a Ph.D. program next fall.

They could have gotten all that and more for their $415,000 budget if they kept their search on the outskirts of Chapel Hill. But, determined to stay within the boundaries of Chapel Hill’s highly-regarded school district, the parents of 5-year-old twins, Megan and Bevin, and 4-year-old Sean trudged ahead in what they dubbed “an exercise in compromise.” Even when they did find a house that showed promise, it was usually snapped up before they could take a closer look. “Most houses seemed to come and go, come and go,” Mr. Adams says.

It’s supposed to be a buyer’s market. Yet, for parents determined to buy in areas associated with top schools, those bargains may be harder to come by. When housing markets go south, “areas with exceptional schools tend to hold their value better than the market overall,” says Michael Sklarz, president of Collateral Analytics, a Honolulu-based firm that specializes in real estate data analysis.

In Chapel Hill, where the Adams family was looking, the average single-family home price, based on price per square foot, has declined about 4.8% since the market peaked in 2007, according to Collateral Analytics, but houses there still command about a 48% premium, per square foot, to homes in the Raleigh-Cary metro area.

In other parts the country, home prices have dropped in areas with good schools, but the declines are typically nowhere near the levels in their surrounding metro areas. In Irvine, Calif., a city that regularly gets national attention for its quality schools, average price per square foot has fallen 18% since its 2006 peak, but prices in the greater metro area surrounding Irvine fell 33%. The same goes for Edina, Minn., where prices per square foot are down about 14% since their peak, versus 27% for the greater Minneapolis area. And in the brainy town of Andover, Mass., prices are down just 4%, versus more than 16% for the Boston metro division.

There are several factors at play, says Mr. Sklarz. Areas with good schools tend to be more affluent and were less susceptible to the sub-prime mortgage debacle so saw fewer foreclosures. What’s more, homes associated with great schools generally sell faster, in good markets and bad.

All of this comes as no surprise to the real estate agents who work with education-obsessed parents. “Schools have a huge impact on home values,” says Kathy Beacham, a real estate broker in Raleigh. When schools in her own well-to-do neighborhood were redistricted three years ago, the value of her million-dollar home dropped more than $150,000. “A good education has always been important but I don’t remember looking at the numbers like parents do today,” she says.

Then again, the numbers have never been so widely available. State assessments, independent ratings from websites like GreatSchools and and annual magazine rankings of America’s top high schools have not only made it easy for parents to factor school test scores and parent-teacher ratios into their buying decisions, they’ve cemented the relationship between home prices and school quality.

When Florida rolled out its statewide grading system in 1999, the real estate market took note. According to research by David Figlio, who is now a professor of education, social policy and economics at Northwestern University, an A-rated school in Gainesville added about $10,000 to the value of a home there versus a B school.

Once a school is graded, the gap often grows. Strong ratings lead to better community support, which in turn leads to better schools. Today, the difference between an A school and B school might easily be $50,000 on a $300,000 house, he says.

That phenomenon isn’t lost on residents of Bellevue, Wash., a Seattle suburb that is home to some of the best schools in the state. “I don’t think there’s ever been a school levy on the ballot here that’s been turned down,” says broker Michael Orbino. Even residents who don’t have school-age children tend to stand behind the schools. It’s not altruism; it’s economics. All things being equal, homes in the Bellevue school district fetch as much as a 15% premium to those just outside of it, he says.

“But there’s more to it than that,” says Mr. Orbino. “Because the land is worth so much more in Bellevue, builders tend to build more expensive homes here,” making the school district that much more expensive to begin with. By Mr. Orbino’s estimate, the prices for single-family homes are down about 10% since the market peak. “But it isn’t a catch-all,” he says. Prices for ultra-luxury homes and condos, which generally aren’t influenced by schools, are down 30% to 40%, he says. So while prices per square foot in Bellevue have fallen slightly more than the Seattle market overall, prices for more family-friendly abodes haven’t necessarily seen the same declines.

The stabilizing effect of good schools is welcome news for those who already own property in school boundaries, but it makes it tough for parents to trade up to better homes. John and Kiely Adams considered themselves lucky to have found a three-bedroom home in a Chapel Hill neighborhood they liked and at a price in their budget. But, alas, they were forced to back out of the deal when their current home came up short in the appraisal. With their daughters’ first day of kindergarten fast approaching, the couple will stay put for now and start the process over again next spring. “We don’t want them to start kindergarten only to yank them out two months later,” says Mr. Adams.

Left with few other options, some parents get creative. Bellevue school administrators have seen all kinds of tactics for skirting the district’s policy that students spend at least four nights a week within boundary lines. Common ploys include using a family member’s address or taking over a resident’s utility bill, one of the documents used as proof of residency. The school district has uncovered 35 cases of enrollment fraud this year alone. Other families jump school boundaries by spending four nights a week in a small apartment and going home to a bigger house in another town for the weekends.

Two years ago, Daniel and Dee Shin used an inheritance from Mr. Shin’s father to pay $410,000 for the “cheapest house they could afford” in Bellevue for the sole purpose of securing a spot in the school district for their then 11-year-old daughter, Kayla. The 900-square-foot circa-1955 rambler is “beat up and not insulated very well,” says Mr. Shin, adding that he assumed that paying property taxes on the house would be enough to satisfy the school district’s residency requirements even if the family actually resided in a 2,326-square-foot, four-bedroom home in the nearby town of Renton. Their new neighbors in Bellevue, evidently, didn’t see it that way. They reported the Shins to the school district, and the district gave them an ultimatum: move into the Bellevue district by the time Kayla registers for high school in February, or start the following school year in another district.

The decision was clear for the Shins. They plan to spend the summer insulating the Bellevue home and doing their best to make it livable. Come January, they’ll move into that house, and their extended family will move into the house in Renton.

The Shins considered just sending Kayla to a private school, but Mr. Shins says that suggestion triggered “on demand tears” from Kayla, who doesn’t relish the idea of going to a different high school than her middle-school pals. After all the trouble the couple went through to get Kayla into Bellevue schools, they’re determined to see her graduate from Newport High School, which, Mr. Shin is quick to point out, is consistently ranked among the best in the country.

As the father of three children ages 11, 14 and 16, Northwestern’s Mr. Figlio understands the dilemma parents face. When he and his family relocated from Gainesville, Fla., to Evanston, Ill., in 2008, Mr. Figlio vetted the middle schools before making a decision about where exactly he and his family would live. For parents struggling with how to get their kids into the “best” schools at a price they can afford, he recommends considering test scores, state ratings and the like—but not getting too hung up on enrolling your child in an A+ school at all costs when a B+ school might actually be a better fit, academically and financially.

Source: The Wall Street Journal, view online at Good Schools, Bad Real Estate

For more information regarding this post or other real estate information contact Robert Dixon at RE/MAX Palos Verdes Realty (310) 703-1848 or email Content of this or any other post is presumed to be accurate but not guaranteed.


PVUSD sues Palos Verdes Homes Association & City of PVE

The Palos Verdes Peninsula Unified School District has filed a lawsuit against the Palos Verdes Homes Association, as well as the city of Palos Verdes Estates, regarding deed restrictions to an undeveloped property at Palos Verdes Drive West and Via Pacheco in PVE. The deed restriction, made in 1938, prevents the sell and development of the lots if they are not used for school purposes.

Today I received an email (below the PV News piece) through Edline, a communication conduit used between teaches, students and parents which favors the district position, names names and I fear seeks to rabble rouse…

Maybe I’m not supposed to express an opinion about such things, but this is flat out nuts!

Regardless of whether the District should or should not have the right to sell, is this really the time to be spending money to litigate? If PVUSD were my client, expressing interest in selling undeveloped land I’d probably say “do you really need to?” This is not a good time to sell and the school district shouldn’t be wasting resources on a win/lose scenario. In the end they’d need to dramatically wholesale the property for a developer to even consider coming to the table.

School District sues over rights to property
By Mary Scott, Peninsula News
April 8, 2010

A dispute about two undeveloped properties, known as Lots C and D, between the Palos Verdes Peninsula Unified School District and the Palos Verdes Homes Association has prompted the School District to file a lawsuit against the association, as well as the city of Palos Verdes Estates, in the Los Angeles Superior Court.

The lots, located in a residential neighborhood between Palos Verdes Drive West and Via Pacheco in PVE, was given to the district’s predecessors by the city and the Homes Association in 1938, according to Superintendent Walker Williams.

The property was handed over, but with restrictions. The deed restriction prevents the sell and development of the lots if they are not used for school purposes.

When the News contacted the Homes Association regarding the lawsuit, the newspaper was told the group had been advised by legal counsel not to comment on the case at this time.

“It’s been a dispute about how this property can or cannot be used for many years,” Williams said. “And we haven’t been able to work it out where we get together and say, ‘OK, do we all agree?’

“We’re hoping that a judge can look at both sides, both arguments and make a determination,” he continued. “Either we’re right or we’re not.”

Williams said the School District owns the lots, although the district never has used them.

“It’s one of the few district properties that we own that is not being used for something right now,” he said.

The School District would like to the explore the possibility of selling the lots, which would be one source of revenue to finish its construction and modernization projects, such as playground renovations, physical education facilities, and the replacement of deteriorated fences and asphalt and concrete surfaces.

However, the properties cannot be sold until the deed restrictions are lifted and the properties are “appropriately rezoned,” Williams said.

The lots currently are zoned as Class F, he added, meaning they can be used for schools, playgrounds, parks, public art galleries, museums or a single-family dwelling.

The superintendent said the district has made attempts to resolve the issue with the association since 2008. But the topic has been ongoing at Board of Education meetings, both in closed and open sessions, as far back as 2005.

“There are [records of] meetings in 2005 with a different Board of Education, directing then-Superintendent Dr. Ira Toibin to try to find out how to sell this property … They were directing Ira to try to sell this property,” Williams said.

As to whether the district agreed upon a lawsuit under “a cloak of secrecy,” as stated in the Concerned Citizens for Peninsula Conservation’s ad in last Thursday’s issue of the News, Williams responded that the vote did take place in a closed session.

“Decisions related to litigation or existing litigation can be decided in a closed session agenda, and so that’s where it took place. It’s not illegal,” he said.

The decision to move forward with the lawsuit, which was voted on at the Jan. 28 board meeting and later reported to the public in open session, is an attempt to resolve the deed restrictions only. The district and the board have not made a decision to sell the property.

“We’ve tried to reach resolution on it, we tried mediation and nothing has worked,” Williams said. “This is where we’re at, at this time.

“Even if a judge rules in our favor, no decision to sell the property has been made,” he continued. “That would be another decision later on.”

There is a process with the state that the district would have to go through before it could do so.

“Really, once and for all, make a decision about what our rights are to the property. We believe we have rights to them; others disagree with us,” Williams said.

From: PV Schools
To: Undisclosed Recipients
Sent: Fri, April 16, 2010 3:35:28 PM
Subject: Update on District Owned Vacant Lots in City of PVE

Palos Verdes Peninsula Unified School District
April 16, 2010

For many years, the School District has owned two dirt lots between Palos Verdes Drive West and Via Pacheco, known as Lots C & D. The unimproved lots are located in a residential neighborhood. This is a separate and distinct property from the district owned land where the Lunada Bay Little League field is located. Lots C & D are not “open space” property; they belong to the District, and until they are sold, the District is free to use them for any District purpose.

The discussion about whether or not the District should sell Lots C & D, or use it for other purposes, has been going on for many years. Prior school boards, along with the present one, have discussed the potential sale of lots C & D as a possible source of revenue to the District. In fact, as recently as 2005, the school board had the foresight to vote 5-0 to sell the lots. At that time the Board consisted of Gabriella Holt, who is now on the board of the PV Homes Association, Ellen Perkins, who is now on the PVE City Council, Barbara Lucky, Dora de la Rosa, and Dave Tomblin.

District leaders promised during the campaigns for Measures K, R, & S (construction bonds) that they would not place the entire burden of paying for the projects listed in the Facilities Master Plan on the taxpayers. In fact, District leaders promised that they would evaluate ALL other possible sources of revenue in order complete projects that would benefit students throughout the community. If Lots C & D were sold in the future, the proceeds would go towards completing projects on the Facilities Master Plan or other identified construction, modernization, and/or safety needs.

The Homes Association’s CC&R’s applicable to the Property currently allow the property to be used for construction of single family residences. It is the antiquated deed restrictions that are the issue between the Association and the District, not the CC&R’s.

The legal dispute centers on the right of the District to sell the property if it wishes. Realistically, the property cannot be sold unless the deed restrictions are removed and the property is appropriately rezoned. For many years, the District has attempted to persuade the Association to remove the deed restrictions. The District believes that the deed restrictions on the property are no longer enforceable. In an effort to resolve these issues, the District initiated mediation in order to avoid litigation. In fact, mediation was begun between the school district and the homes association in November 2008 in an attempt to amicably resolve the dispute and avoid legal action. No agreement could be reached between the parties. While the representatives of the Homes Association were sympathetic to the District’s financial plight, they were unwilling to voluntarily waive the deed restrictions. At this point, the District and Homes Association invited the City to join the mediation, but the city declined to participate.

When mediation failed, and faced with no other options, the District initiated legal action. The Court has been asked to determine if the deed restrictions are, as the District contends, unenforceable. If the District prevails, the court will remove the deed restrictions. The District will then have clear title to the property.

The property will also need to be rezoned and subdivided into four lots. Although the City has zoning and subdivision control over the property, the District contends that California law requires the City, upon the District’s request, to rezone the property to allow single family residences and to allow the two lots to be separated into four lots, the same size as the neighboring residential lots. Although the City has been added to the lawsuit, the District continues to discuss land use issues with the City and hopes to be able to resolve these issues without a trial.

The District believes its legal position is strong and that the lots can ultimately be sold for between $2-4 million. The school board believes that investing in a legal determination once and for all in order to generate maximum revenue for the benefit of its students is fiscally prudent and the only responsible thing to do.