Pros and Cons of Having Amazon HQ2 in Town
January 22, 2018
The city Amazon selects for its second headquarters, known as HQ2, will likely see an immediate hike in home prices and a new-construction boom in areas within commuting distance of the new campus, says Javier Vivas, director of economic research for realtor.com®. Amazon, which announced the list of 20 finalists under consideration for HQ2, is expected to also invest $5 billion in the local economy of the winning city and create 50,000 high-paying jobs.
Home prices in other communities have experienced a boost when big companies move to town. Since automaker Tesla opened a battery factory in Reno, Nev., in 2014, local home prices have surged 43 percent, says Daren Blomquist, senior vice president of communications at real estate data firm ATTOM Data Solutions. And when Apple moved its headquarters to Cupertino, Calif., the value of homes located within a mile of the campus appreciated an average of three percentage points faster than the rest of the country, according to realtor.com®.
The affect of Amazon’s HQ2 on home prices in the city it chooses will depend on the existing inventory, recent home price performance, buyer demand, and the space available for new construction, CNN Money reports. Blomquist believes that Pittsburgh, Indianapolis, and Columbus, Ohio, could see the biggest gains.
“The impact in markets where there has been single-digit appreciation … we could see a jump, at least in the short term, to double digits of 10 percent to 20 percent or even more appreciation for the first year,” Blomquist told CNN Money. But in housing markets with already limited supplies, such as New York and Boston, home values could potentially increase even more as a flood of new employees move to the area.
Fernando Ferreira, an associate professor at The Wharton School of the University of Pennsylvania, cautions that if Boston were HQ2’s home base, it could be “chaos.” “The housing market would be three times worse than it already is” due to already tight housing inventory, he says.
Current homeowners, though, will be the biggest beneficiaries of an HQ2 housing boost. “If you are in a larger house and ready to downsize or move, this will be a pure gain for you,” Stijn Van Nieuwerburgh, a professor of finance and director of the Center for Real Estate Finance Research at New York University’s Stern School of Business, told CNN Money. But homeowners should also be ready for higher property taxes due to an increase in home prices. That, however, could be a boon to the city’s budgets for schools and local programs.
Source: “Why You Want Amazon to be Your New Neighbor,” CNN Money (Jan. 20, 2018)
Updated: January 18, 2019