What makes a hot property? High-end foods appear to play a role.
There's the Starbuck's Effect, and now there are the Whole Foods and Trader Joe's Effects. Whichever way you roast, pour or slice your organic purchases, where any of these retailers pop up, home values are sure to go up, too.
What's behind this phenomenon? And is there a real correlation between home values and the existence of a trendy coffee house or grocery store? Maybe, but it's probably not as closely related as it might appear to be.
What's the Starbuck's Effect
In case you aren't familiar with this new, trendy real estate term, the Starbuck's Effect, coined by Zillow and confined by Quartz, says that where a Starbucks opens, home values will go up.
The Quartz analysis does reveal a trend, and it's a persuasive one. After tracking the recovery of home prices in areas that are near a Starbucks and those that aren't, homes located near the coffee giant not only recovered fast, but also higher.
Better groceries and coffee, and better home values go hand in hand.
How it's Translating to High-End Grocery Stores
After identifying the Starbuck's Effect, it didn't take long to wonder which other retail locations might have a similar real estate stimulating effect. The two stores evaluated were Whole Foods and Trader Joe's.
According to RealtyTrac, the trend really does cross over into high-end groceries. Their study shows that homes located near Trader Joe's 'have seen an average 40 percent increase in home value.' That's better than Whole Foods, which RealtyTrac says increases nearby residential values by about 34 percent.
Are Property Values Really Driven by Retail Shops?
At first glance, it's easy to assume that all of this information is purely coincidental. After all, couldn't a neighborhood that was already growing attract a Starbuck's or Trader Joe's? It could, but Quartz says that's not what's happening, at least not with Starbuck's.
Evaluating data from as far back as 1997, the properties located near Starbuck's have consistently fared better. They followed the local up and down trends. But they also stayed ahead of homes near a Dunkin' Doughnuts and all other homes. So while one location might be costlier to begin with, the data shows a direct relationship to a venti cup of whichever fair-trade mountain grown goodness you prefer and how far and how high home values will go.
Whether you live near a Whole Foods, Trader Joe's or Starbuck's, chances are you're in for a home value boost. Data is just that, and it can't account for attitudes and preferences of people buying and selling nearby. But it does reveal that homes near one of these specialty shops are likely to increase faster than those that are located elsewhere.
Maybe Whole Foods created a whole new price point, or maybe an improving economy attracted Whole Foods. Regardless of how you see it, some upscale shops are a sign of good real estate appreciation in the future.
Curious now about how your home's value compares to others in your area? Get a free property valuation and see all of the details.