From wsj.com:

Highly ranked school districts may have been spared the worst of the foreclosure crisis, according to a new analysis, showing that the housing crash was akin to a tornado that tore through wide swaths, but hit with particular force in certain areas.

The analysis, conducted for Developments by Location Inc., a Worcester, Mass.-based company that mines local data for businesses and consumers, looked at six months of 2011 sales data collected by RealtyTrac Inc. It showed that the percentage of foreclosure (or “real-estate-owned”) sales went down as the school ranking went up in five metro areas – Jacksonville, Fla; Atlanta; Toledo, Ohio; Stockton, Calif.; and Seattle. Higher-rated school districts also maintained higher home-sale prices, and higher home prices per square foot.

“If you are looking to buy into one of these good school districts, it is very rare to find a foreclosure,” said Location Inc.’s chief executive Andrew Schiller, an expert in demographic analysis who conducted the research with his colleague Jonathan Glick. “It’s better to just go into a normal sale.” (The five cities were chosen to provide a general market overview.)

The finding is, to a certain extent, not a surprise. Schools have long been a driver for home buyers, whether in determining location or timing. So it would make sense that school ranking could serve as a kind of proxy for measuring the damage from the foreclosure crisis.

It’s also not that foreclosure sales don’t exist in highly ranked districts; they are just much less of a factor, and the reason could be income. Stan Humphries, chief economist for real-estate data company Zillow, said that it’s “likely both educational outcomes and foreclosures are ultimately linked to income, not to each other.”

The upper tier of homeowners saw less of an impact from the housing crash than the bottom tier, according to Mr. Humphries; the top third of homes dropped 26% from the recent high point; the bottom third of homes in value fell 37%. Some sought-after neighborhoods probably saw less severe price erosion, which in turn helped sustain property taxes and protect a vital funding source for schools.

Mr. Schiller said he sees school quality as both a result and a driver of income concentrations in parts of metropolitan areas. “Once in place, the higher-quality school systems reinforce this, causing higher demand for properties there, and higher values.”

Good schools may also be one of few factors keeping buyers in certain markets today, further bolstering prices and property-tax bases in sought-after districts like Newton, Mass. and Cupertino, Calif., said Glenn Kelman, chief executive of the online brokerage Redfin. “People always want to live in those school districts,” Mr. Kelman said. “And those school districts have remained well-financed even as neighboring districts have to cut costs.”

The boom brought in all kinds of potential buyers, Mr. Kelman said, but potential buyers today “better have a damn good reason, and usually that reason is 6 years old.”

That description could fit Dina Davis, 43, and her husband, Bob, 47, both engineers who bought a home in March in Bellevue, Wash., in order to move their two children into better schools. Bellevue has rating of just over 98 (out of 100) compared with about a rating of 34 for their former district nearby, according to a state-specific ranking Location Inc. used in this analysis based on federally mandated state tests.

“It was a world of difference,” Ms. Davis said of her new school district. Her kids are thriving, and they were able to sell their former home, a 1930s Craftsman with a view of downtown Seattle, without dropping the asking price.

Finding the right home at the right price in Bellevue took some work. They ended up closing on a short sale for $392,000. “We probably bought the cheapest house in the neighborhood,” she says. “But we also had to do the most work on any house in the neighborhood.”

Competition for homes in highly ranked districts is not unusual. The Journal’s analysis found that when owners did sell in highly ranked districts, they almost always sold for more money than lower-ranked districts.

Foreclosures priced at big discounts can drag down overall home prices, but only when they reach a “tipping point” as a percentage of all home sales in a market, according to Daren Blomquist, a spokesman for RealtyTrac. This point is usually about 1%, after which prices continue to drop as sales of bank-owned properties rise.

Foreclosure sales may be higher in lower-ranked districts, in part, because during the boom some buyers ignored the importance of schools in determining value. “I think what people were doing is they were chasing prices instead of the value in the home. A lot of people had the mindset that they could move in two years,” said Nicholas Pasquini Jr., co-owner of Century 21 Redwood Realty, which has offices in northern Virginia and Washington, D.C.

Newlyweds, for example, may have assumed they would move before schools would be a concern. “I think a lot of people got burned by way that thinking,” Mr. Pasquini said.