The Walmart Effect on Home Prices: Economists Say Home Prices Have Increased Near Stores

Walmart and home prices: A tale of 159 cities.

June 14, 2012, 9:12 AM

June 14, 2012 — -- Walmart, the nation's largest private employer, has been accused of skimping on workers' wages, but critics now may have a hard time arguing the presence of the giant retailer negatively affects housing prices.

An economics research paper from the University of Chicago and Brigham Young University found that the presence of a Walmart led to the increase of housing prices by 2 to 3 percent on average for homes within 0.5 miles of the store. For houses located between 0.5 and 1 mile of the store, prices increased 1 to 2 percent.

The researchers analyzed 159 stores that opened between 2000 and 2006 that had available housing price data, and compared home prices 2.5 years before and after the Walmart opened.

Devin Pope, an economics professor at the University of Chicago Booth School of Business, who wrote the paper along with his brother, Jaren Pope, an economics professor at Brigham Young University, said many people have written about the positive and negative effects of Walmart stores, which number more than 4,400 in the U.S., including Sam's Club warehouses. Walmart has 10,130 retail units in 27 countries, according to the company website.

The study, published as a working paper with the National Bureau of Economic Research in May, is called "When Walmart Comes to Town: Always Low Housing Prices? Always?"

It looked at stores in 20 states, all with varying numbers of stores. California had the most stores analyzed at 36, while Florida had the second largest number at 21. Six states, including Tennessee and Wisconsin, had only one store each that was analyzed.

Pope provided a list of 19 of the 36 stores analyzed in California. The cities were spread throughout the state, from Placerville in the north to Chula Vista, near the Mexican border.

Pope said housing prices may provide some picture that shows the net impact of a Walmart store on a neighborhood.

"When you see housing prices increase and a change in an environmental amenity, there is a group of people happy with that amenity," he said.

The company employs about 1.4 million people in the U.S.

Devin Pope said the analysis controlled for other factors that may have led to the price increases, such as national housing trends. The paper does not explain how home prices changed in each city because the analysis was conducted at the aggregate level to control for national trends.

Pope said the paper did not research trends past 2.5 years after the Walmart was built, but it is possible prices would increase further.

However, he said, he would be surprised if home prices did not decrease in some of the 159 communities he studied as a result of the Walmart.

Randy Millwood, a resident in Lincoln, Neb., thinks his neighborhood is going to be one of those communities.

Retired military and stay-at-home dad, Millwood, 45, is concerned that a 24-hour Walmart Supercenter proposed to be built in the middle of the premier subdivision where he lives will negatively affect prices by affecting the quality of life.

Home prices in his development range anywhere from $250,000 to $400,000, he said.

"A supercenter is not the way to go. Maybe a smaller market -- that might be something that we could get behind," Millwood said of the smaller Walmart Neighborhood Markets. "A supercenter is just ridiculous."

In Nebraska, the average Walmart Supercenter spans 185,000 square feet with about 142,000 items, according to Walmart's website.

This proposed Walmart, Millwood said, may be on the smaller side, at 133,000 square feet, but he is still against it.

Walmart Neighborhood Markets are about 42,000 square feet with about 29,000 items. As of April 30, Nebraska didn't have any Walmart Neighborhood Markets, but it did have 32 Walmart Supercenters and three Sam's Clubs.

Alternatively, Millwood suggested Walmart build a supercenter just west of the subdivision, a development prepared for a "big box" store like Walmart with taxpayer money in 2008. Those plans were scratched, in part, because of the economic downturn.

ABC News' Lincoln, Neb., affiliate, KLKN, reported the Walmart in Millwood's neighborhood was expected to open in the fall of 2013.

"That's what kind of burns us," he said. "The city of Lincoln would let Walmart build anywhere else in the city without telling them they need to build out there."

In a statement, Walmart said it has worked with the commmunity to address their concerns: "We've made it clear from day one that we want to come to the South Lincoln community the right way. That's why we selected a site that's had the proper zoning in place for a decade and is located among other commercial developments, including a hotel and auto dealership. Also, we're listening to neighbors and working towards solutions" about traffic flow and other matters.

Walmart's reception from neighbors and its effect on housing prices likely varies as much as the cities in which Walmart stores are based.

In Los Angeles, some groups have welcomed plans for a Walmart Neighborhood Market in Chinatown. The Asian Business Association and the Chinese Chamber of Commerce wrote a letter supporting the prospect of a store this year.

"For over 20 years, we have watched mainstream grocery retailers neglect the space beneath Grand Plaza," the organizations wrote in a letter dated June 11. "At 33,000 square feet, this space was designed specifically to provide our community with more fresh grocery options, yet no grocer was willing to invest. ... However, unions and special interest groups from outside of Chinatown are utilizing stall tactics to stop the store from being built and deny our community the benefits of an anchor retailer."

The pro-Walmart groups say workers could earn "competitive wages and benefits." In California, the average wage for regular, full-time hourly associates is $12.79 per hour, according to Walmart's website.

The Los Angeles Chinatown Business Council also wrote a letter of support for the proposed store.

A group, including the Los Angeles Alliance for a New Economy, Los Angeles County Federation of Labor and the Chinatown Coalition for Equitable Development, said the wages will be too low and they are organizing a protest against the store opening.

In urban Washington, D.C., there is no Walmart yet, but the city does have a number of other big box retailers, including Best Buy, Home Depot and Target. Six Walmart stores, however, have been proposed across the region, the first of which is expected to open by the end of 2013.

Mike Wilson, an organizer with DC Jobs with Justice, said he had concerns if housing prices do indeed rise near the planned stores, as the Pope brothers' report suggested.

"As far as housing prices go, D.C. is already an expensive city," he said. "There's concern about the affordability of retail workers living in D.C."

When Walmart decided to open stores in D.C., announcing in November 2010 the initial stage of its current plans, the retailer said it committed to understanding the communities where it hopes to do business. The company said, to date, it has participated in more than 200 community meetings and documented its commitment to "help stimulate economic development, expand access to affordable groceries and create quality jobs in the city."

Steven Restivo, a spokesman for Walmart, said the company's jobs are among the best in the retail industry, "offering competitive pay and benefits as well as the opportunity for advancement."

"For those reasons and more, over 300,000 of our U.S. associates have been with the company for more than 10 years," he said.

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