Consider Your Neighborhood Grocer When Buying a Home

How close is your property to the nearest supermarket? More importantly, does that nearby grocery store happen to be a Whole Foods or Trader Joe’s? If not, you might wish it were—or at least pay more attention when purchasing your next home.

A recent report by ATTOM Data Solutions explores the connections between grocery stores—specifically Trader Joe’s, Whole Foods, and ALDI—and how they seem to affect the local housing market for both homebuyers and investors. To do so, ATTOM analyzed data on current average home values, home appreciation from 2015-2020, average home equity, home seller profits, and average ROI flipping rates for investors in all U.S. zip codes with at least one Whole Foods, ALDI, and Trader Joe’s.

Perks of Living Near Trader Joe’s

Over the last five years, home values have appreciated nationwide. However, zip codes with a Whole Foods saw an average price appreciation of 33%, while Trader Joe’s came in at 35% and ALDI at 41%.

Trader Joe’s led the pack in terms of home value. Properties near a Trader Joe’s had an average value of $644,558, while homes near Whole Foods were valued at $532,224 on average. Neighborhoods near ALDI were valued far lower, coming in at an average of $250,850.

Furthermore, average home equity tended to fluctuate depending on the neighborhood’s grocery store. Homes near a Trader Joe’s had the most equity, posting 37% on average. Whole Foods came in second with 33% average equity. To bottom out the list is ALDI, with 26% average equity, below the national average of 29% for zip codes with these grocery stores present.

Benefits of Investing Near ALDI

Because of lower home values, properties near an ALDI seem to be perfect for investors. Data suggest that the gross flipping ROI for homes near an ALDI average around 58%. Compare this to homes near Whole Foods and Trader Joe’s, where flipping ROI falls significantly to 36% and 30% respectively.

Home seller ROI tells a slightly different story though. Investors who buy near ALDI’s are still gaining: The average home seller ROI is 41% for these properties. However, their returns are actually lower than those who invest near both Whole Foods and Trader Joe’s. For those two stores, home seller ROI hits 51% for Trader Joe’s and 43% for Whole Foods—rates equal to or better than the 43% national average for zip codes with these stores.

Why Grocery Stores Impact Property Values

The main reason for home pricing differences among these three chains is that they all target different segments of the population. Whole Foods targets millennials and environmentalists, who are willing the spend the extra money on organic and natural products that are eco-friendly and healthier. Trader Joe’s is considered Whole Foods’ primary rival, but Trader Joe’s is more focused on creating a unique and fun shopping experience in contrast to Whole Foods’ upscale setting.

Regardless, the demographics that these two stores attract are typically wealthier individuals with college degrees, making it more likely that home values near these stores—which are certainly strategically placed—are higher. ALDI, on the other hand, is a no-frills market that blends low prices with quality products for middle-class shoppers. This means that home values near an ALDI are going to be lower by the nature of the wealth living in that area.

The Bottom Line

The takeaway for investors is to always remember to look beyond typical data and conventional analysis when choosing housing markets. Instead, check out firsthand the cities and neighborhoods you’re considering. Take note of the grocery stores, the people, the cars, the shopping, and other amenities. Honing qualitative assessment skills is another major component of achieving success in the real estate industry.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.