What’s the Big Deal About School Districts?
It is trite but true. The three most important things in real estate are location, location, and location.
For commercial real estate, that usually means easy access to customers, highways, railroads, or rivers. In residential real estate, the most desirable locations invariably (and not coincidentally) are close to good school districts. In Western PA, with the exception of the toniest neighborhoods within Pittsburgh’s city limits, the most valuable residential real estate is in the school districts that are rated the highest.
The logic of this is inescapable and as basic as the immutable law of supply and demand. Parents want their children to have the best education possible. The school districts perceived to be the best will be the most popular, even if the homes in those districts are more expensive. As long as there are more parents interested in those districts, there will be competition for the homes that are for sale there. If, as is the case with metro Pittsburgh today, most of the most desirable school districts have little new construction, that competition for homes will push prices higher.
When homes in a community with great schools are high priced, the homeowners can be very confident that the home they purchased will appreciate. So, even if you are buying at what seems like the top of a market, you can feel comfortable that your home will be more valuable in the future.
In Pittsburgh in 2025, this virtuous cycle of home appreciation is amplified by the extended slowdown in new home construction in the most desirable locations. Builders in Western PA have been dealing with a shortage of lots for 15 years, a shortage that is worse in places like Mt. Lebanon, Fox Chapel, Upper St. Clair, or Hampton Township. Even in districts that were recently still adding 90-100 new homes every year – Pine-Richland, Franklin Park, and South Fayette, for example – new construction has slowed significantly.
Economics 101 would suggest that the demand for new construction would trigger new development, but that is not the case. New development is inordinately expensive. The gap in price between new and existing homes is wider than ever. There are fewer developers in the Pittsburgh market today than there were a generation ago. But, as much as any other factor, the biggest drag on new construction is the lack of opportunities in the most desirable school districts. That creates opportunities for more construction in second- and third-tier school districts, if builders and developers are willing to take the risk that buyers will follow.
Good Schools Equal Good Investment
The case for buying a home in a good school district is easy to make. Homes located in districts known for their strong academic performance, excellent extracurricular programs, and overall positive environment tend to attract families who prioritize education. Parents want to provide their children with the best opportunity to excel and enrolling them in the more reputable school systems supports that goal. But demand for homes in good school districts is not limited to families with kids in school.
Good school districts often come with additional perks that can boost property values, including well-maintained parks, family-friendly events, and other community amenities. There tends to be lower crime rates and better economic growth in communities with good school districts. Such features enhance the overall living experience and make neighborhoods more appealing to potential buyers, regardless of stage of life.
Communities in good school districts have a self-fulfilling virtuous cycle that creates better-than-average home appreciation. The correlation between school quality and property values is not anecdotal; it is a well-documented phenomenon in real estate markets across the country.
The New York Times periodically looks at the relationship between educational test scores and home prices in suburban neighborhoods. The most recent study, completed before the pandemic, uncovered that a five percent improvement in test scores raised home prices by as much as 2.5 percent. In 2013, Redfin compared homes similar in style, size, and condition that were near both highly-ranked and less desirable public schools. According to their report, Americans, on average, “pay $50 more per square foot for homes in top-ranked school districts compared with homes served by average-ranked schools.” It is likely that the accelerated appreciation of the post-pandemic years will have exaggerated these effects.
Graystone Investment Group notes in its report, The Strong Correlation: Why Good Schools Boost Home Values, that homes located in top-rated school districts often demonstrate greater resilience during economic downturns or real estate market corrections. While no area is immune, the consistent demand from families prioritizing education can help these homes retain their value better than properties in less sought-after districts.
School spending has been proven to increase home values. A study done by the National Bureau of Economic Research found that home values increased $20 for every one dollar spent on public schools in a community.
Area school quality can influence not only the value of a home, but also the buyers’ decision. According to National Association of Realtors’ (NAR) Profile of Home Buyers and Sellers, more than half of home buyers with children in the home under the age of 18 years said that the quality of school districts is an important factor when purchasing a home.
Homeowners are willing to compromise on “must have” features to live in the right school district. Realtor.com surveyed prospective homeowners on the subject and found that a surprising share would sacrifice needs or pay more to locate in a better school district. One out of five buyers would give up a bedroom or a garage for a better school. One out of three would purchase a smaller home to wind up in the right district. One out of five home buyers said they would pay six to 10 percent above their budget for the right school. One out of 10 would double that to 20 percent. That premium could approach $100,000 in parts of the Pittsburgh market.
Buyers have more resources to evaluate school districts than before, especially buyers new to Western PA. There are online platforms that specialize in rating and ranking schools and districts (GreatSchools, Niche, School Digger, etc.). These sites aggregate various data points into easily digestible rankings, including test scores, parent reviews, and demographic information.
“People will call from out of state and will list the best school districts in our area. They might just Google ‘top 10 schools in Pittsburgh’ and tell us where they want to live,” says Jeff Costa, president of Costa Custom Homebuilders.
Building in Pittsburgh’s Best Districts is Tough to Do
So, how do these dynamics translate to new construction in Pittsburgh? For property values, very well. For new development, not so much. Several of Pittsburgh’s top 10 school districts see fewer than 10 new homes being built each year. Since the start of 2024, in fact, the number of permits issued for new single-family homes in the combined top 10 school districts was roughly 15 percent of the total number of homes started in metropolitan Pittsburgh.
In 2024, only Peters Township School District and North Allegheny School District had communities in the top 10 municipalities for new home construction. Peters Township, which overlaps the school district 100 percent, was the most active municipality for new home construction in the metro area, with 115 homes permitted in 2024. Marshall Township, in North Allegheny School District, was the tenth most active, with 74 new homes started. In the other municipalities North Allegheny serves, Franklin Park, McCandless, and Bradford Woods, there were only 35 permits issued for new homes combined.
In two of the top three districts, Mt. Lebanon and Upper St. Clair, construction is almost nonexistent. So far this year, 11 homes were permitted for construction. In Mt. Lebanon, there are so few lots for new construction that half of the new homes started are the result of demolition of existing homes.
It is worth noting that there are virtually no neighborhoods in metropolitan Pittsburgh where housing is readily available, including many of those that might be considered undesirable to home buyers. A perfect storm of factors, from unfavorable demographics to government regulation to untimely shifts in interest rates, are keeping existing homes off the market and making new construction too expensive to act as a relief valve. Whether you are looking to move up to a million-dollar home or trying to find an inexpensive starter home, there are few options available and many buyers are looking for a home.
These conditions should make it ripe for development in the next tier of school districts. To some degree, that is what has occurred in recent years. In 2024 and 2025 thus far, the top municipalities for new home permits were in districts that had solid reputations but were outside the top five rankings. Those include Adams Township (Mars Area School District), North Huntingdon Township (Norwin School District), Zelienople, Cranberry Township, and Jackson Township (Seneca Valley School District), Jefferson Hills (West Jefferson School District), and Buffalo Township (Freeport Area School District).
Many of these active areas have plenty of available land left to develop and are located outside of Allegheny County. That means a lower tax bill for good schools. Another reason that some of the more active municipalities are seeing new construction is that the homes being built are targeting the large empty-nester population in Western PA.
It has been well documented that Pittsburgh has one of the oldest populations in the U.S., which makes it a strong market for empty nester communities. Scarmazzi Homes is one of several builders in Pittsburgh that has developed new residential properties geared towards empty nesters. Paul Scarmazzi, the firm’s CEO, notes that building communities in good school districts is less important to his buyers than other considerations; however, school districts are a factor of sorts in his calculation.
“It only matters for ‘baby chasers’ in our demographic,” Scarmazzi jokes. “For the most part, though, it doesn’t matter to our buyers, and we’ve been reluctant to go to high tax districts to develop new communities.”
The “baby chasers” Scarmazzi refers to are Baby Boomers who base decisions about downsizing from the family home on their grandchildren’s location. It is not insulting but recognizes that America’s most influential generation is considering where its children (and grandchildren) are living when making choices about where they live. For that reason, school districts are part of the equation for the 55-and-over crowd, but more empty nesters are willing to consider the property tax implications of their home location than where their grandkids live.
“An important question is what is being built. If it’s entry-level housing or move-down 55 and over, I don’t think school district will be a factor. As a matter of fact, we’re seeing those kinds of buyers wanting to flee the Allegheny County taxes,” notes Tom Hosack, president/CEO of Berkshire Hathaway HomeServices, The Preferred Realty. “It’s a positive if the school districts are great, but the downside is that the school taxes are very high.”
Three of the ten most active homebuilders in Pittsburgh – Traditions of America, Scarmazzi Homes, and Weaver Homes – cater exclusively to the 55-and-over demographic group. Demand for empty-nest living is strong enough that it is driving new construction higher in a number of school districts that are not on the family buyer’s wish list, like Deer Lakes, Butler Area, and Ambridge school districts. Successful development in those districts with empty nester homes is not translating into broader scale development.
“We work with a gentleman that has a great piece of land in Ambridge School System and the only builders that will be interested in that are those that build empty-nester homes,” says Darlene Hunter, vice president of new construction at Howard Hanna Real Estate Services.” It’s in a great area in Economy Borough and Weaver Homes and Foxlane Homes have already built patio homes there, but I don’t think other builders want to take that risk.”
Hunter notes that the risk of a stalled development, one in which lots are selling at a slower pace than meets the developer’s profit pro forma, is one reason why projects are not opening up in lower-ranked school districts.
“Buyers are still very selective about schools, so builders are too,” she says.
Costa Custom Homebuilders builds primarily on individual lots that homeowners purchase, rather than developing lots for sale. Jeff Costa says that while some of his clients are focused on building on a large piece of land, the majority still consider school district as a primary factor in selecting a lot.
“I would say seven out of 10 base their decision on school district. Whether they know it or not, that’s what they are looking for,” Costa says. “They purchase in a good school district for educational and financial reasons. In a good school system, the home value tends to increase over time.”
Heading into 2026, there are finally some indications that the market conditions may change. The Federal Reserve Bank has signaled strongly that it feels it can end its restrictive policy and is expected to cut rates by a full percentage point over the next year. While the rate that the Fed cuts is its overnight bank lending rate, the persistent easing of the brakes by the central bank should finally impact long-term rates.
With the cost of new construction topping $300 per square foot, and $400 per square foot at the higher end of the market, the desire by homeowners to live in the best school districts is becoming too expensive to satisfy. With 30-year mortgage rates hovering near seven percent for more than two years, existing homeowners with low-rate mortgages have been reluctant to sell and take on a higher mortgage. That makes it more difficult for prospective buyers to buy or build in desirable districts.
Heading into 2026, there are finally some indications that the market conditions may change. The Federal Reserve Bank has signaled strongly that it feels it can end its restrictive policy and is expected to cut rates by a full percentage point over the next year. While the rate that the Fed cuts is its overnight bank lending rate, the persistent easing of the brakes by the central bank should finally impact long-term rates. Fannie Mae, the government-sponsored enterprise that buys most of the residential mortgages originated by regional lenders, forecasts that the 30-year fixed mortgage will end 2025 below 6.5 percent and will be 5.9 percent a year from now.
Homebuilders will find it easier to sell homes with mortgage rates under six percent. Most builders have used some of their anticipated profit margins to buy down mortgage rates for buyers over the past few years. As the long-term rates ease, builders can ease back on incentives or use the same level of incentives to buy down to an even lower, more competitive rate. Moreover, if short-term rates fall another percentage point, it will reduce the cost of construction financing, which is based on floating short-term rates.
Perhaps the combination of better financing conditions and scarcer opportunities to build homes in the most desirable locations will lead to an increase in development in less desirable, but more affordable housing. D.R. Horton, the nation’s largest homebuilder, is aggressively buying lots to gain more market share in Pittsburgh and is capable of economically developing homes that are at or below the median home price. Horton’s entry into the market coincides with the region’s most active builders, Ryan Homes and Maronda Homes, introducing more affordable designs. It would serve higher-volume builders well to look beyond the safest development locations, since fewer of those exist. Hunter is skeptical that such a change in approach is forthcoming.
“I think we’ll have to be completely saturated in the top markets before builders move to areas where the school district has a lesser reputation,” she says.
Hosack believes that builders may be underestimating the opportunity to build a more affordable home in a lower-ranked school district.
“If there is a new home product for $300,000 in any community, you could sell it because there is no competition. At least from my vantage point, everything that’s built is selling. I do not know of a stalled development. Some of the new projects aren’t even being phased; they’re building the entire plan at once,” Hosack says. “We are looking to develop 160 units in West Deer. We are talking to Horton about building townhomes in that low-$300,000 range.”
“I can see D.R. Horton making that move because they can build more economically. I think they are building at the right price point and product for that area,” says Hunter. “You can find buyers in less desirable markets if it’s the right product and price point.” NH