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Offbeat Here's how much the 'Starbucks effect' adds to home prices

14:12  07 june  2018
14:12  07 june  2018 Source:   cbsnews.com

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This is how much a Starbucks adds to the price of a nearby home . The researchers found that home prices go up even higher when there are nearby businesses that have a lot of reviews.

How Much Does It Cost to Move? By Mary Boone on 23 Mar 2018. Here ’ s a hot home -buying tip that’s been percolating since “Zillow Talk: Rewriting the Rules of Real Estate” was released: Buying near a In that time, Starbucks has had the biggest effect on home values in these metro areas

a clock hanging from the side of a building: The Starbucks logo is seen outside a store on May 29, 2018 in Philadelphia. © Kena Betancur / AFP/Getty Images The Starbucks logo is seen outside a store on May 29, 2018 in Philadelphia. Since Starbucks first expanded out of Seattle to march across America, the appearance of a new Starbucks store has been widely understood to indicate that a neighborhood was gentrifying. 

Now, a Harvard Business School study puts a real number on that impact: a half a percent spike in nearby home prices.

"Can the entry of a hip coffee shop predict housing prices?" asked Michael Luca, an economics professor at Harvard Business School. "It's something a lot of people talk about but there isn't good evidence of it."

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The biggest " Starbucks effect " was in Boston, where nearby home values went up 171% in the same time period. That' s 45 percentage points more than all homes in the city. Starbucks is usually a harbinger of good times for a locality.

Here ’ s what we can tell you: Starbucks equates with venti-sized home - value appreciation. “ Home prices rise and fall for a lot of reasons. How do we know this has anything to do with Starbucks ?” For instance, maybe this isn’t a Starbucks Effect at all.

Luca and his coauthors examined the volume of Yelp reviews for various businesses and matched them with data from the Census Bureau, Zillow and other sources to find a consistent—and fast—effect. "If a new coffee shop goes into a zip code, this predicts housing prices go up 0.5 percent in a year," Luca said. 

While a half-a-percent bump might seem minor, the numbers mount quickly—especially considering the already stratospheric real estate prices in New York, Los Angeles, San Francisco and other cities in the study.

Starbucks' world domination?

For a home priced at $1.3 million—the median in both New York and San Francisco—a single new upscale coffee shop would increase the price by $6,500. "It's a big effect considering that this is kind of a small signal," said Luca. 

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How much faster? Over 17 years tabulated by Zillow, leading up to 2014, homes adjacent to the Of course, there is a chicken-or-egg question here : Are coffee shops causing a boost in home values In that sense the Starbucks Effect might be more accurately be termed the Whole Foods Effect

April 24, 2015. The “ Starbucks Effect ”: Correlation vs. Causation. So how do we determine if Starbucks is the main mechanism driving the greater increase in value, or if instead the added increase in Would the home value disparities continue once Starbucks was no longer as new?

While Luca's paper focused on a number of upscale coffee shops, not just Starbucks, other studies have also noted a "Starbucks effect" that strengthens the closer a property is to the chain.

Of course, the cafés may not deserve the credit—or blame—for hiking costs. As Luca said, and as other researchers have pointed out, it could be that Starbucks' location scouts are just better at spotting the next gentrifying neighborhood than your typical homebuyer is. Many of the factors a hip chain wants for a new location, such as walkability, other upscale businesses nearby, and a population with disposable income, are the very factors that would contribute to property price increases.

In that regard, "Starbucks may be more of the follower than the fuel," Boston magazine noted a few years ago. 

Nonetheless, for residents who are wondering whether it's time to buy—or to lock down a lower rent—checking out Yelp might be a good move. The researchers found that home prices go up even higher when there are nearby businesses that have a lot of reviews. For every 10 extra reviews a business received on Yelp, housing prices in that ZIP code increased by 1.4 percent. 

Philadelphia Police Department unveils new policy on how to handle trespassing in wake of Starbucks arrests .
PHILADELPHIA - The Philadelphia Police Department on Friday announced a new policy on how to confront people accused of trespassing on private property, two months after coming under fire for arresting two black men waiting for a colleague at a Starbucks. Officers are now instructed to first attempt to de-escalate and mediate disturbances between property owners and accused offenders. Before an officer arrests someone, that person must understand he or she is not allowed on the property. The officer also must witness the person refusing to leave.

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