Mortgage Watch | June 17, 2019

When coffee and equity go hand in hand

Starbucks. We search for them on freeways as if they are ports in a storm, use them as an oasis when shopping to rest our weary feet, meet business people there for non-threatening sales conversations and interviews or even introduce ourselves to blind dates there — all with the feeling that they are safe, public places with clean restrooms, cozy atmospheres, and comfortable surroundings. Even if we work from home, we occasionally take our laptops to one to place ourselves in a more creatively-conducive atmosphere.

Starbucks was founded by Jerry Baldwin, Gordon Bowker, and Zev Siegel, opening its first store in 1971 across the street from the historic Pike Place Market in Seattle. The three founders had two things in common; they were all coming from academia, and they all loved coffee and tea.

Whatever the reason people flock to them, Starbucks is indeed more than a coffee shop chain. In the U.S. they are a way of life, evidenced by recent Harvard Business School study showing they can improve values in any neighborhood in which they suddenly appear. It’s called the “Starbucks effect.”

While it’s not the go-to place for everyone, most will recognize Starbucks as an asset to homeowners who live nearby. Between 1997 and 2013, homes closer to the branded coffee shop increased in value by 96%, compared to 65% for all U.S. homes — 31% more than that of all U.S. homes. Boston saw the largest appreciation over this time where home values increased 171%, 45% more than all the homes in Boston. But do people specifically search out neighborhoods containing a Starbucks when looking for a home? If they don’t, maybe they should.

The study examined data from Yelp!, the online business review platform, Zillow, and the United States Census data, and an interesting trend was found. When a new Starbucks is introduced into a zip code, home values increased by 0.5 % within a year. But the chicken-or-the-egg comparison also enters the picture: is the opening of a new Starbucks store a sign home prices are increasing or because Starbucks stores bring more affluent customers to the area? Whichever the reason, it was determined that it was a bellwether that a neighborhood could be changing.

The study showed that a new Starbucks is a sign of gentrification, which means changing demographics as well. Some savvy long-term investors look for promising locations lacking the coffee house and then watch as one opens and their investments steadily rise in value.


Rates Currently Trending: Neutral

Mortgage rates are trending sideways this morning.  Last week the MBS market worsened by -20 bps.  This was enough to move rates or fees slightly higher. We saw modest volatility throughout the week.


About the Author

Tim Morissette, also known in the community as Mr. Foothill Ranch, offers over 46 years of real estate experience which has given him an established reputation and unmatched market knowledge. He is joined by his wife, Michele and sons Matt and Jeff, as they continue to offer personal service with an emphasis on achieving his clients’ real estate goals.  This unique combination of traits has led to his proven track record of referral and repeat business. This can be witnessed by the trust of homeowners in Foothill Ranch where he has sold twice as many homes and represented three times more buyers than the next-leading real estate agent for the last 26 years.

As residents of Foothill Ranch since 1994, Tim and Michele are actively involved in the community by fundraising for Foothill Ranch Library, Make-a-Wish Foundation, Cancer Society, Homes for Habitat, Relay for Life, South County Outreach, and the local church and schools. Tim enjoys sponsoring community-wide garage sales, paper shredding and e-waste recycling event, an Easter egg hunt, & a Meet Santa Event.

Tim and Michele are dedicated to their family of four sons, daughter-in-laws, and grandchildren. As a family, they enjoy many outdoor activities which include camping, spearfishing, mountain climbing and exploring the miles of hiking and equestrian trails in Foothill Ranch and the Whiting Ranch Wilderness Park. Tim and his sons are also avid snowboarders and enjoy mountain biking and lobster diving. Family is a top priority in the Morissette household. They look forward to helping more families achieve their dreams of homeownership.