The opening of grocery stores such as Trader Joe's and Whole Foods in a neighborhood is often greeted with much excitement, as these bring tremendous convenience to the whole community. But more than giving residents quicker grocery runs, having these two retailers proves to be beneficial for the local housing market as well.
In a study conducted by Zillow, homes specifically near Trader Joe's and Whole Foods grow more rapidly in value. Between 1997 and 2014, data show that homes near these grocery chains "were consistently worth more than the median U.S. home." Additionally, by the end of 2014, houses that are situated within a mile from any of these stores were twice as much in value than any regular house.
Real estate analysts call this the "Starbucks effect," as the coffee giant has also proven to increase a neighborhood's local housing value.
"Like Starbucks, the stores have become an amenity in their own right - a signal to the home-buying public that the neighborhood they're located in is desirable, perhaps up-and-coming, and definitely improving," said Stan Humphries, Zillow's Group Chief Economist. "Like a self-fulfilling prophecy, the stores may actually drive home prices. Even if they open in neighborhoods where home prices have lagged those in the wider city, they start to outperform the city overall once the stores arrive."
The study, detailed in Zillow's new book entitled "Zillow Talk: Rewriting the Rules of Real Estate," gathered data from millions of homes near various Trader Joe's and Whole Foods locations.
Analysts observed that homes within a mile of a future Whole Foods or Trader Joe's store appreciate more slowly before it opens, and quickly boost after the opening date. Within two years of establishment, the median home has appreciated up to 10 percent more than other homes in the city.
It can be pointed out that either Trader Joe's and Whole Foods are good at choosing locations that may appreciate faster, or they are actually the cause of the increased appreciation. Either way, this phenomenon concludes that grocery stores and home values are extremely correlated.
"The grocery store phenomenon is about more than groceries. It says something about the way people want to live - in the type of neighborhood favored by the generations buying homes now," said Zillow Group CEO Spencer Rascoff. "Today's homebuyers seek things in neighborhoods that weren't even in real estate agents' vocabularies a generation ago: walkability, community, new urbanism - and maybe we should add words like sustainable seafood and organic pears."
