School Quality, Housing Prices, and the Changing Cost of Information
n this paper we investigate the relationship between school quality and information disclosure in
housing markets. When presented with the option of identifying their local public school in a
real estate listing, we find that sellers with homes assigned to higher-performing schools are
more likely to provide this information, an effect that is driven by sellers of large single-family
units. Further, we find that controlling for school quality, information disclosure has no
independent effect on housing prices for single-family homes, implying that buyers with a high
willingness-to-pay for school quality will seek out information on school quality on their own.
On the other hand, we find that sellers’ disclosures about schools have a large positive impact on
the sale price of small multi-family residential units in 2001-02, but the effect disappears by
2006-07. Presumably, the increasing ubiquity of the Internet and the availability of new data
under No Child Left Behind dramatically reduced the cost of gathering information on school
quality over this period. Taken together the results reveal substantial heterogeneity in buyers’
willingness-to-pay for information on school quality, they support the findings of the education
literature on the importance of school quality in housing markets, and they confirm the
“unraveling” theory of information disclosure found in other markets.
Will post to SSRN soon.