Housing Prices and Incremental Substitution

A friend who lives in Great Falls, Virginia posed the question recently: Is there a premium for a house in the Langley High School district versus South Lakes High School? Langley High School is predominately located in the postal addresses of McLean and Great Falls, and the majority of the South Lakes High School district falls in the boundaries of Reston. This question has at its core the basic principle of “incremental substitution” that Thomas Sowell addressed in Basic Economics. In the example of housing selection, what can a homeowner give up in exchange for a lower price, or reverse is there a higher price paid for a certain part of an element of the commodity of housing.

To try and determine if there is a statistical difference in value between these two schools, I prepared a Comparative Market Analysis from the Multiple Listing Service for all detached homes sold price $500,000 to $1 million from April 1, 2010 to date (August 4, 2010). I selected those homes that the listing agent identified as falling within the Langley High School pyramid and then those that were listed as being in the South Lakes High School pyramid. The data gleaned is below.

Langley High School: Average Sold Price $828,385; Median Sold Price $828,762; Average Seller Subsidy: $1,537; Average Sales Price Less Seller Subsidy: 826,848

Average Days on Market-Property: 62, Median 20; 70 Single-Family Detached Homes Sold; Average age 1974; Average Lot Size.97 acres.

South Lakes High School: Average Sold Price $656,177; Median Sold Price $635,000; Average Seller Subsidy: $3,970; Average Sales Price Less Seller Subsidy: $652,207

Average Days on Market-Property 55, Median 22; 61 Single-Family Detached Homes Sold; Average 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 days longer to sell in the Langley pyramid but that could very well have to do with the fact that it typically takes more time to sell a more expensive property, no matter where it is located. Other factors that could be coming into play is that the average lot size is almost twice that in the Langley pyramid than it is in the South Lakes pyramid, but the average age in South Lakes is ten years newer than that of Langley. Selecting a high school that is the right place for a particular student to flourish is very much an individual decision. Langley is well respected, listed #47 in the U.S. News and World Report December 9, 2009 issue: America’s Best High Schools 2010: Gold Medal List. And South Lakes offers the well regarded International Baccalaureate program. The Fairfax County Public Schools is the 12th largest in the nation and offers a variety of programs that help determine which school offers the educational environment that enriches the experience for each particular student.