The cachet of upscale grocery store chains is driving home values and accelerating appreciation growth in neighborhoods across the country, says Zillow.
A new analysis from the online real estate database reveals that home prices begin appreciating faster than those of the city as a whole when the property is located closer to a Whole Foods or Trader Joe’s.
Homes in proximity to either of the two grocery stores were found to be worth more than the median U.S. home price between 1997 and 2014, with homes in a one mile radius from the high-end grocery stores worth twice as much as the nation’s median home price at the end of 2014.
The presence of a Whole Foods or Trader Joe’s follows the phenomenon of prominent franchises such as Starbucks, which serve as a community gathering spot and signal to buyers that the neighborhood is desirable or in some cases up-and-coming, said Zillow economist Stan Humphries in a news release. A neighborhood with a Whole Foods or Trader Joe’s, which sell organic products often at a premium cost, embodies the characteristics that today’s home buyers want—walkability, improved community status, and new urbanism. The reputation garnered by these grocery stores indicates that the neighborhood is above-par because of the store’s commitment to quality, health, and focus on food education.
This ideal may in fact directly influence home prices and spur appreciation growth, with the prices of homes close to Whole Foods or Trader Joe’s consistently outperforming those in the city as a whole, even in areas where they lagged prior to the introduction of the grocery stores. The study found that before the stores opened, homes near future sites of a Whole Foods or Trader Joe’s were appreciating at a slower or equal rate to other homes in the same metro. But, once the stores opened, homes located within one mile saw a significant boost in appreciation rates.
After being open for two years, homes within a mile of Trader Joe’s saw an appreciation of 10 percentage points more than the rest of the city over the previous year.