- Yelp’s online platform provides valuable real-time data to predict housing price increases.
- This new way of studying the economy could give real estate investors and homebuyers an edge.
- These new housing market insights are meant to complement government-related data.
Harvard economists have found a new way to monitor potential housing price changes in neighborhoods that are gentrifying or experiencing an influx of wealthier people who renovate existing homes and businesses. This new method of studying the economy could be used as a tool for real estate investors or average homebuyers and sellers looking to gain a financial edge.
In their 2018 study, “Nowcasting Gentrification: Using Yelp Data to Quantify Neighborhood Change,” Edward Glaeser, Hyunjin Kim, and Michael Luca found that the opening of a new neighborhood Starbucks store could signal that nearby housing prices are on the verge of increase.
Keep Reading: How to Find Out How Much Your House Is Really Worth
How to Use Starbucks, Yelp as Your New Home Value Estimators
By comparing current housing prices in a neighborhood to pattern changes in Yelp data focused on grocery stores, cafes, restaurants and bars in the same neighborhood, the study found that the opening of a new Starbucks is related to a 0.5 percent increase in home prices in the area within the same year. The study also found the number of Starbucks reviews for specific locations can predict a spike in housing prices: For every 10 new Starbucks reviews posted to Yelp, a 1.4 percent increase in housing prices was recorded in that same ZIP code.
Real-Time Data Could Help You Negotiate a Better Home Price
Yelp’s data represents neighborhood changes in real time as users of the platform are constantly providing reviews on businesses in the neighborhoods they visit or live in. This up-to-date information provides a different insight into property value changes than what delayed government data — such as the Census and Federal Housing Finance Agency — can provide, opening up the potential for “nowcasting” home values. But the economists don’t discount the value of government data: “While these platforms are not a substitute for traditional government statistical data, they provide an important complement — offering novel insights into the economy, often in close to real time.”
Related: How to Invest in Real Estate
The economists are also not suggesting that a new Starbucks in an area is the cause of rising housing prices. Instead, they believe a more likely hypothesis is that the opening of a new Starbucks in an area confirms that economic activity in the related area can mean that neighborhood is on the upswing.
More on Buying and Selling Homes