Thursday, November 13, 2014

Walmart and its Impact on Housing Prices

In many communities, the building of a new Walmart is far from welcome.  Some of the complaints include increased traffic volumes, pricing that puts local merchants out of business, lower wages that push down wages for those working at competitors and downward pressure on the price of housing because of the visually unappealing prospect of having another big box store plus the accompanying retail outlets as a neighbour.  There has been substantial research regarding the labor-effects of Walmart but there has been little actual study on the impact of Walmart on local housing prices.  A study by Devon Pope at the University of Chicago and Jaren Pope at Brigham Young University looked at over a million housing transactions that took place near 159 new Walmart stores that opened between 2000 and 2006 to see if the opening of a Walmart really did have an impact on the price of nearby housing.    Here are their conclusions.

As background, according to Walmart's 2014 Annual Report, Walmart served nearly 140 million weekly shoppers to its fleet of 4203 American stores (excluding Sam's Club which adds another 632 stores) during fiscal 2014.  Walmart employs 1.2 million "associates" or nearly 0.8 percent of the U.S. workforce.  During fiscal 2015, Walmart plans to add between 21 and 23 million retail square feet or the equivalent of between 385 and 415 units.  ttle actual study on the impact of Walmart on local housing prices.

The authors first examined the history of Walmart openings to get a sense of Walmart's preferred demography.  They noted that during the 1970s, 1980s and 1990s, Walmart tended to build their stores in counties where median household incomes were $3000, $2000 and $1000 below the average for the state respectively.  This changed during the period of the study, between 2000 and 2006, Walmart built new stores in counties where the average median household income is approximately $2000 above the average for the state.  This means that Walmart is no longer tending to build in communities with lower incomes and is trying to appeal to a different demographic group.

The building of a Walmart store is often accompanied by an overall retail expansion in the nearby area.  Additional businesses will set up, using Walmart as the attraction for customers.  If households find it desirable having convenient access to additional goods and services nearby then having a new Walmart could have a positive impact on housing prices.  If, on the other hand, the building of a new Walmart leads to increased traffic, increased light and noise pollution and increased crime among other issues, there would be an adverse impact on housing prices.

As I noted above, the authors used two datasets:

1.) data showing where and when Walmart opened new stores in the period between 2000 and 2006 as shown here:

2.) data for more than one million real estate transactions that took place within four miles of one of the 159 new Walmarts that opened between 2000 and 2006 as shown here:

The authors used the dataset to compare the selling prices of homes before a Walmart opened and after it opened along with comparing prices for homes very close to a new Walmart to those somewhat further away. 

The authors conclusions suggest the following:

1.) the opening of a new Walmart store increases housing prices by between 2 and 3 percent for houses located within a half mile of the store.

2.) the opening of a new Walmart store increases housing prices by between 1 and 2 percent for houses located between one-half and one mile of the store.

This suggests that the average selling price of a home within one-half mile of a new Walmart would increase by approximately $7000 and by $4000 for homes located between one-half and one mile of the store.

The results also suggest that the positive impact on housing prices was slightly larger within a half mile of a new Walmart Supercenter than for a regular Walmart.  In the half to one mile radius, the impact of a Walmart Supercenter was even greater, increasing housing prices by approximately 2 percent. 

Overall, the benefits of easy and quick access to lower retail prices offered by Walmart is seen to outweigh the negative impacts of having a nearby Walmart.  This relationship holds for an average situation, however, their are other external factors that may, in some cases, cause real estate prices to decline when Walmart "comes to town".


  1. Interestingly enough, the closer to Walmart the cheaper the house...

  2. @other Anonymous Did you even read the article, the conclusion was just the opposite of what you said the prices increased as you got closer to the walmart.