Your local grocery market (especially if it includes a Trader Joe’s and a Whole Foods Market) has a lot to do with what happens in your local housing market, according to a new analysis by Zillow featured in the paperback edition of Zillow Talk: Rewriting the Rules of Real Estate (Grand Central Publishing, Jan. 26).
Specifically, Zillow found that homes grow more rapidly in value if they are closer to a Trader Joe’s or Whole Foods. Between 1997 and 2014, homes near the two grocery chains were consistently worth more than the median U.S. home. By the end of 2014, homes within a mile of either store were worth more than twice as much as the median home in the rest of the country.
“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 Zillow Group Chief Economist Stan Humphries. “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 first book by Humphries and Zillow Group CEO Spencer Rascoff became a New York Times bestseller after its hardcover release in January 2015. The book – out this week in paperback with a bonus chapter about the grocery store phenomenon – draws on Zillow’s 10-year history collecting and analyzing real estate data, busting common myths and turning conventional wisdom on its head.
“The grocery store phenomenon is about more than groceries,” said Rascoff. “It says something about the way people want to live – in the type of neighborhood favored by the generations buying homes now. 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.”
Zillow analyzed the values of millions of homes near dozens of Trader Joe’s and Whole Foods to conclude that grocery stores and home values are definitely related.
According to the Zillow analysis, the median home within a mile of a future Whole Foods store appreciates more slowly than other homes in the same city before the store opens. In the months before the stores open, the trend reverses and flips, so that after the stores’ opening dates, homes near Whole Foods appreciate more quickly than other area homes.
Homes near future Trader Joe’s locations were appreciating at close to the same rate as other homes in the same city before the stores opened. After the opening date, however, Zillow found a clear boost in home appreciation rates. Two years after a Trader Joe’s opened, the median home within a mile of the store had appreciated 10 percentage points more than homes in the city as a whole over the previous year.
The analysis clearly shows that homes near the stores appreciate more quickly than homes in the city as a whole. That means the two brands are very good at choosing locations that will appreciate faster in the future, or are actually spurring home appreciation growth – or some combination of the two.
Business Insider named Zillow Talk one of the 15 Best Business Books of 2015 and Fortune called it a top five read for 2015. Zillow Talk is available at national and independent retailers including Amazon and BarnesandNoble.com.
In 2015, after sifting through data related to 1.7 million homes in 188 zip codes, RealtyTrac researchers discovered that homeowners who live in the same zip code as a Trader Joe’s show their property values increased 40% since they purchased. The increase for homes near Whole Foods was 34%, which was the average value increase for all zip codes.
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