Walmart vs. Target: Which is Better for Home Values?
Walmart trumpets its “always low prices,” but homeowners who live near one of the chain’s big box stores will likely be disappointed to learn that the discounting apparently extends to their homes as well. Homes located close to a Walmart store appreciate more slowly in value than those nearer to the superstore’s big rival, Target, research by real estate data firm Realty Trac found.
People who lived near a Target and sold their homes in 2015 saw their home’s value increase by an average of $65,596, or 27%, since purchase. Those who shared a zip code with a Walmart enjoyed less significant gains of $24,900, or 16%. Nationwide, the average appreciation was 22% and the average price gain was $40,626.
Overall, homes near Target stores were worth 72% more than those near a Walmart ($307,286 vs. $178,249). Living near a Target also went hand in hand with higher property taxes. Homeowners who were Target neighbors spent an average of $7,001 per year on property taxes, 123% more than people living near a Walmart.
Having a Walmart set up shop in the neighborhood doesn’t necessarily mean your home’s value is going to tank, though. Rather, Walmart may be more likely to open stores in areas that are less wealthy, while Target focuses on higher-income areas. The average Walmart shopper has an annual household income of $53,125 per year, according to data from Kantar Retail, about $12,000 less than the typical Target customer.
“This is not necessarily showing that Targets are the reason that these homes are gaining value,” RealtyTrac spokesman Daren Blomquist told Realtor Magazine. “Targets are picking neighborhoods where the homes tend to be higher value.”
Homes sharing a zip code with a Walmart may not be worth quite as much as those close to a Target, but having a “Wally World” nearby isn’t all bad news. When a new Walmart opens, the price of homes within a mile of the store jumps by $4,000 to $7,000, or 1% to 3%, according to a 2012 study by researchers at the University of Chicago and Brigham Young University.
The convenience of living near a big box store helped explain the spike in home prices, the researchers speculated. There is a “preference by many households to live near a Walmart and the stores that naturally agglomerate nearby,” they wrote.
Walmart and Target aren’t the only chains that seem to have an effect on neighboring home values. Proximity to a Starbucks equals faster home price appreciation, an analysis by Quartz found. And it’s not just that the coffee chain is really good at picking up-and-coming neighborhoods to open new stores. The closer a house to a Starbucks, the more it increased in value, with homes located within a quarter of a mile of one of the coffee chain’s outposts appreciating 21% over five years, while those half a mile away appreciated 17%. “People are paying a premium for homes near Starbucks. And furthermore, it looks like Starbucks itself is driving the increase in home values,” the analysis concluded.
Local grocery stores matter to housing values too. Homes close to a Whole Foods or Trader Joe’s are worth more than twice as much as the median U.S. home, according to a Zillow analysis. The presence of the stores is a signal a neighborhood is desirable, which might help to spur increases in home prices, according to Zillow chief economist Stan Humphries.
“Like a self-fulfilling prophecy, the stores may actually drive home prices,” Humphries said in a statement. “Even if they open in neighborhoods where home prices have lagged those in the wider city, they start to outperform the city overall once the stores arrive.”
Before you decide to buy a house, you might want to drive by the nearest strip mall and look for a Target, Trader’s Joe’s, or Starbucks. The presence of those stores doesn’t just signal easy access to Frappuccinos and Two-Buck Chuck. It could mean the home is a smart investment.