THE STARBUCKS EFFECT

WEBNERBOB

Often you see news stories that combine odd facts and statistics, and you wonder:  is the story reporting causation, or just correlation?

Consider the so-called “Starbucks Effect.”

If you’ve bought a house recently, you’ve probably used Zillow, a real estate website that provides lots of useful information about houses on the market with just a few keystrokes.    Zillow’s CEO and its chief economist, Spencer Rascoff and Stan Humphries, wrote a book called Zillow Talk: The New Rules of Real Estate that addresses the economics of home buying and home owning and attempts to answer questions that have long bedeviled home owners — like, should I remodel my kitchen, or my bathroom?

One chapter addresses the “Starbucks Effect.”  After crunching the numbers, they found that homes located near a Starbucks appreciated far more than homes located farther away.  From 1997 to 2014, houses in a Starbucks zone increased 96 percent, versus 65 percent for Starbucks-deprived residences.  And the closer to that green sign the better:  in five years, houses within a quarter-mile of a Starbucks went up 21 percent while houses a quarter-mile to a half-mile away increased only 17 percent. 

So, is this quirky statistic reflective of causation, or correlation?  Rascoff and Humphries conclude that a neighborhood Starbucks does drive up home prices, although they’re not sure exactly why.  Perhaps people equate a Starbucks with neighborhoods that are safe, monied, and thriving, or perhaps they really like the convenience of walking only a few blocks for their morning brew, or perhaps a nearby Starbucks makes them feel like urban hipsters.  Others wonder if the statistics are simply showing a correlation, because Starbucks must carefully analyze the economic conditions at potential locations for its stores.  In short, Starbucks isn’t going to try to peddle high-end lattes and frappucinos on Skid Row, and therefore it’s not surprising to see Starbucks ‘hoods outperform others.

It’s a chicken-and-egg type argument:  which came first, rising home prices or the Starbucks?  Some questions are unaswerable, and this is probably one of them.  I’m happy to report that we live very close to a Starbucks, although its presence had nothing to do with our decision to buy our house.  After reading about the “Starbucks Effect,” though, I’m hoping that it never closes.

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