It’s the school district. The people who care a lot about a school district have very different income profiles and priorities than other buyers. For one, they are almost always are married couples, often with two earners, so that alone makes them willing to spend a lot more money for a single house than say, a single person who is only housing herself. Additionally, couples with kids, or plans in the near future to have kids, will factor in the cost of primary school education into the cost of their home. This will make them perceive the added value of the house as worth $100K or so as an “investment” in their child’s education. This is the reason why schools which have high test scores, such as Arcadia, San Marino, Claremont and South Pasadena usually have higher housing prices than their neighbors. I won’t rehash it all, but this subject is written up in an excellent chapter of the book The Two-Income Trap by Harvard economist Elizabeth Warren. It accurately attributes most of the increase of housing in the 70′s to the creation of the dual-income household and the chasing of good schools as the holy grail of parenthood. Parents, it turns out, are *most* fearful of their children’s safety and development and are thus most easily convinced to part with their money on such things, including housing.

It turns out though, that this is largely a misguided pursuit, with schools test score averages not likely to influence how well your child actually does later in life, and it is also shown that the additional money spent on a home in a nicer school district can often by invested in private school education to better effect. But it definitely sells houses!