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Grocery Stores and Home Values

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Posted On: 08/10/2016

Question:

We live in an older, established, residential neighborhood with very little new home construction. However, a major grocery chain is now building a half-size version of their big store here. Some neighbors say home values will increase while others worry about traffic and falling values. How can we expect the store to impact our neighborhood?

Answer:

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When chain retailers build a store, they’re making an investment that will hopefully produce a positive income stream for decades so you can be sure that a lot of research went into their site selection. You have to see this as a good evaluation of your neighborhood because the population density and income were regarded as strong enough to justify a major investment.

In 2015, RealtyTrac looked at what happened to home values near two leading food retailers, Whole Foods and Trader Joe’s. It found that “homeowners near a Trader Joe’s have experienced better home value appreciation since their purchase, but also pay higher property taxes on average.”

“Homeowners, near a Trader Joe’s,” said the company, “have seen an average 40 percent increase in home value since they purchased, compared to 34 percent appreciation for homeowners near a Whole Foods.”

It’s not just grocery stores. A 2015 study by Zillow found that “between 1997 and 2014, homes within a quarter-mile of a Starbucks increased in value by 96 percent, on average, compared with 65 percent for all U.S. homes.”

These studies are not so much about eating as they are about convenience, bringing together residential real estate along with commercial and retail elements within a small space. If you have an older suburban neighborhood that has sprouted a grocery store consider yourself ahead – local homes are likely to be more salable in part because your area is now more competitive with newly emerging town centers and redeveloped downtown areas.

A 2010 study by Montgomery County, Pennsylvania provides a description of the neighborhood elements buyers now want. The big items include what might be called “walkability” – a large central plaza or park, mixed-use properties (residential, retail, recreation and commercial in one area), “unobtrusive” parking, and “appropriately-scaled” height.

If you look at planned communities such as Greenbelt and Columbia in Maryland as well as Reston in Virginia, you can see how they combine diverse elements while preserving large green spaces. The result is very attractive residential areas as well as solid home values: It’s worth noting that Reston and Columbia are located in two of the three most affluent counties in the country.

Traffic from a grocery store is unlikely to be a problem. Supermarkets are used throughout the day and this tends to hold down peak time traffic issues. However, while traffic is unlikely to be a serious concern, higher home values mean higher property taxes and that's a legitimate worry, especially for those with fixed incomes.

Peter G. Miller is author of "The Common-Sense Mortgage," (Kindle 2016). Have a question? Please write to peter@ctwfeatures.com.

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