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

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.