When a Starbucks opens in town, home prices tend to rise

When a new Starbucks comes to town, you can expect to find a 0.5% increase in house prices in that ZIP code within a year, according to a recent study by the Harvard Business School.

Using data from restaurant review site Yelp and the U.S. Census Bureau, the study found a distinct correlation between the opening of a new coffee chain location and home prices in the surrounding area.

But that doesn’t mean that Starbucks is attracting more affluent residents. In fact, the opposite is likely true.

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"The most natural hypothesis to us is that restaurants respond to exogenous changes in neighborhood composition, not that restaurant availability is driving neighborhood change," the study asserted.

The study presents a broader assessment of gentrification measures, determining that the neighborhood development is “strongly associated” with a jump in the number of restaurants, bars, cafes and grocery stores.

In the study, the economists say they have landed on an accurate way to analyze gentrification.

HBS Associate Professor Michael Luca told CNBC that Yelp can complement official data from government agencies by providing real-time updates on neighborhood stores.

“Yelp data has the advantage of being more up to date than most official government statistics," Luca said. "It also contains metrics on things like cuisine, prices and ratings that can be difficult to observe otherwise.”

Based on their observations, the study asserts that a Starbucks opening can be a sign of gentrification.

“The presence of a Starbucks is far less important than whether the community has people who consume Starbucks,” the study stated. “Consequently, we think that this variable is likely to be a proxy for gentrification itself.”

Apparently, real estate agents and investors looking for clues about future property values can learn a latte from the presence of a new green sign in the neighborhood. 

Source: CNBC