By Marilyn Kennedy Melia, CTW Features
Worried about where home prices are headed?
With the pandemic-led price spikes receding, buyers and owners are worried values could erode significantly in future months.
Some guidance on price direction over the course of several years can be gleaned if a home is near one of these grocery chains: ALDI, Trader Joe’s, or Whole Foods.
Real estate data firm ATTOM, has been following price trends in zip codes containing at least one of the grocery markets, building on similar studies, like tracking home values near Starbucks locations.
ATTOM’s latest analysis looks at five-year price appreciation from the end of 2017 through 2022, trends reflect today’s shortage of moderate and lower-priced homes.
That’s why homes near discount grocery ALDI had the highest “return-on-investment” or “ROI” of 61 percent over the period, versus a 51 percent ROI nearby Whole Foods, and a 58 percent ROI for homes near Trader Joe’s.
ROI is determined from the total amount of money put into a home [down payment, improvement costs, taxes, etc.] versus the bump-up value. The shortage of lower-priced homes pushes values up more than for more expensive ones, resulting in greater ROI, explains Rick Shargo of ATTOM.
However, by 2022, homeowners near an ALDI “had the lowest amount of equity – 38 percent – versus 45 percent for those in proximity to Whole Foods and 50 percent for Trader Joe’s. This is likely because higher-income homeowners made larger down payments and didn’t draw down on their equity as much through cash-out refinances or equity loans, Sharga.
Neither this grocery study nor the similar study on proximity to Starbucks conducted by Zillow doesn’t mean these retailers directly cause home price changes, says Jeff Tucker, Zillow’s chief economist. Rather, the characteristics of the population relate to value trends.
Still, the presence of these stores, “should give homebuyers at least a little bit of confidence that the neighborhood is reasonably healthy and has good prospects for growth,” Sharga concludes.