The Wal-Mart Effect on Housing Prices?
Walmart is such an iconic part of our culture. I know people that will never go to a Walmart and will not shop there. I also know people that want to be in the "zone" which is within driving distance and feel very frustrated when, in the Portland/Beaverton area, that there was not a Walmart to drive to unless one crossed a river.
Now, if you have lived in the Portland Metro area very long it is not that difficult to hop on a bridge to cross a river. But if you are a newcomer, or take public transportation, it may take a little planning.
In my neighborhood, there is a long time Walmart that has been there forever, and it is slowly being transformed into a superstore, you know the kind that has fresh food and full grocery. During the remodel, the garden center has disappeared.
One thing that you can count on is change!
Have you ever wondered if the arrival of Wal-Mart stores increases or decreases the prices of surrounding homes? The argument goes something like Wal-Mart Stores Inc. will hurt small businesses, put a damper on wages and increase traffic.
Well, two college professors decided to investigate their wonder regarding the ‘Wal-mart’ effect.
Devin Pope, an assistant professor at the University of Chicago's Booth School of Business, and his brother, Jaren, an assistant professor at Brigham Young University, decided to delve into the topic as an extension of Jaren Pope's research into the effect of cell towers, airports and steel mills on property values.
In an article by Mary Ellen Podmolik, she noted that their recently published research indicates that values increase an average of 2 to 3 percent for homes within half a mile of a Wal-Mart store and 1 to 2 percent when the home is a half mile to 1 mile from a store.
"We weren't sure which one of these would dominate," Devin Pope said. "We didn't have a good feel. But what's nice about looking at housing values is that housing values reflect the positive and the negative of what a Wal-Mart can bring. It gives a nice way of looking at the net effect of Wal-Mart."
Podmolik’s article noted that the duo studied more than 1 million home sales between January 1998 and January 2008 near 159 Wal-Marts that were built between July 2000 and January 2006. They compared the prices of homes within four miles of a store that sold up to 21/2 years before an opening or 21/2 years afterward. The long time frame was picked on purpose, after the researchers discovered that the median number of days between when Wal-Mart announced a new store and when it opened was 516 days.
An interesting fact that the duo uncovered was that Wal-Mart's entry into a market often acted as a beacon, generating other economic development nearby.
The average increase was $7,000 increase for houses within half a mile of a new store, and $4,000 for homes half a mile to 1 mile away.
"On average, the benefits to quick and easy access to the lower retail prices offered by Wal-Mart and shopping at these other stores appear to matter more to households than any increase in crime, traffic and congestion, noise and light pollution or other negative externalities that would be capitalized into housing prices," the professors wrote.
"Our belief is this paper would update (people's) beliefs a little bit," he said. "Hopefully, they can take it and add it to the rest of the body of knowledge."
Michael Hobbs, PahRoo Appraisal & Consultancy
Twitter @PahRoo
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