The ‘Walmart effect’ on home prices?

June 4th, 2012 20:31

House Money

Walmart critics have long said that nearby home values can go down when a new store opens its doors. However, researchers decided to test that theory and see if there really is a “Walmart effect” on local homes.

What they found: Nearby Walmart stores can actually drive up nearby home prices.

Economists Devin Pope at University of Chicago and Jaren Pope at Brigham Young University analyzed more than 600,000 real estate transactions near 159 newly opened Walmart stores between 2001 and 2006.

The researchers found that homeowners located within a half mile of a new Walmart store saw their home prices increase anywhere from 2 percent to 3 percent, or an average of $7,000, in two-and-a-half years after the new Walmart opened. Homeowners located a half-mile to one-mile away also saw a boost, with home prices rising 1 percent to 2 percent, or about $4,000.

“It was not until after the announcement and during the building process that we see homes close to the Walmart start to increase in value relative to homes that are slightly farther away,” the researchers say. “This suggests that it was the building of the Walmart itself that caused the change in housing values that we find, and that our results are not simply explained by Walmart building in areas that are experiencing housing price increases.”

Critics, however, are quick to note that the study doesn’t take into account the effect on home prices with a new Walmart in rural areas. Also, some previous studies have shown that Walmart’s low prices can increase the number of nearby poverty-level households.

Source: “When Walmart Comes to Town, Home Prices Go ...” CNNMoney (May 30, 2012)