School Quality, Residential Choice, and the U.S. Housing Bubble

Abstract

Using data from the American Housing Survey (years 2001–2009), we find that purchase prices for homes selected primarily to access self-identified “good schools” rose (relative to homes selected for other reasons) during the key U.S. housing bubble period, compared with the periods before and after the bubble. We observe a similar pattern in homebuyers' mortgage-to-income ratios. Various regression specifications and propensity score matching techniques show that these trends persist conditional on a range of household, demographic, and economic controls. Our results suggest that the strong, bubble-era pursuit of good schools may have played a role in the housing bubble's expansion.