When Walmart Comes to Town: Always Low Housing Prices?

June 25, 2012

One of the most significant changes over the past two decades in the U.S. retail market is the expansion of large box stores and supercenters. Walmart is the largest of these rapidly growing retailers and is currently the biggest private employer in the world. Further, its low prices and broad variety offer substantial opportunities for saving, especially for low-income households, say Devin G. Pope of the University of Chicago and Jaren C. Pope of Brigham Young University.

However, despite the consumer benefits from the expansion of supercenters into new geographic markets, there is often significant opposition and controversy when Walmart tries to open a new store. One of the most common claims against the massive retailer is that its stores exert a downward pressure on nearby home prices.

The researchers used data from 159 Walmarts that opened between 2000 and 2006 to test if the opening of a Walmart does indeed lower housing prices.

  • They found that a new Walmart store actually increases housing prices by between 2 and 3 percent for houses located within 0.5 miles of the store.
  • Further, a gain of 1 to 2 percent was also noted for houses located between 0.5 and 1 mile from the store.
  • For the average priced home in these areas this translates into an approximate $7,000 increase in housing price for homes within one-half mile of a newly opened Walmart and a $4,000 increase for homes between one-half and one mile.
  • These gains were even more pronounced for those 86 cases of the 159 in which the new store was a Walmart Supercenter.
  • The researchers were quick to emphasize that, through a number of statistical tests, they were able to conclude that the data support a causal interpretation; that is, the construction of the Walmart directly led to the house price increase.

On average, the researchers find that the benefits of easy access to the lower retail prices offered by Walmart and shopping at other stores appear to matter more to households than any increase in crime, traffic, noise and light pollution, or other negative externalities that would be capitalized into housing prices.

Source: Devin G. Pope and Jaren C. Pope, "When Walmart Comes to Town: Always Low Housing Prices? Always?" University of Chicago, May 2012.

For text:

http://faculty.chicagobooth.edu/devin.pope/research/pdf/Pope_Pope_walmart_aej_applied.pdf

 

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