What Does Marijuana Legalization Do to the Real Estate Market?

large home for sale the real estate market

The marijuana industry is unlike any other commercial sector in our nation. It not only develops an entirely new industry, but it causes major booms in ancillary sectors. From replenishing old and dying markets to increasing the overall economy, marijuana has more potential than most other retail industries. In particular, marijuana and real estate are beginning to find a niche relationship, and the growth is insane

Why Marijuana and Real Estate Are Connected

marijuana dispensary sign

Cannabis is unique in the sense that as its industry booms, so do multiple ancillary sectors. In fact, the growth of ancillary sectors branching off of marijuana is practically unheard-of. Real estate is finally noticing the role marijuana will play in its industry as legalization continues to spread.

Legalized states are noticing the full effect that marijuana has on its economy. Not only does it bring hundreds of thousands of dollars in through marijuana taxes, but it causes natural growth in the local economy. When home values increase, it brings in more businesses, which creates better public services like education, transportation, and law enforcement.

The Relationship Between Marijuana and Real Estate

hands planting baby cannabis plant

Before the recent data, many people thought that legalization would cause a decrease in the local real estate market. People thought the crime near dispensaries would increase, in turn, causing the home values to drop. While the relationship between crime and legalization is widely debated, the correlation doesn’t make sense with real estate.

Even with a slight increase in violent crimes in Colorado and Washington since 2008, they still sit well under the national average for violent crimes. It just doesn’t make sense that in the most established legal marijuana markets, there is no abnormal increase in crime. Without the fear of a crime increase, there isn’t any reason to avoid a legalized state. In fact, why wouldn’t people want to move to a state with a booming economy and growing community?

Home Values in Legalized States

Regardless of what people think, the numbers show a drastic increase in home values in legalized states. Not only do marijuana and real estate go hand in hand on a commercial level, but the overall local home values skyrocket as legalization spreads and cannabis markets thrive. Think about it; the retail marijuana market brings in large investors and ancillary businesses which create economic growth, which brings in more taxes, which causes a circulation of cash, which increases living wages, which increases the number of homes purchased, which creates a demand in the home market, and finally, increasing the overall local real estate.

Moving to a legalized state is one heck of a long-term investment, but the potential return is enormous. Even with the concern of heightened crime rates or an increase in homeless people, the growth doesn’t change.

Using findings from a helpful study done by Clever Real Estate, we’re able to see just what happens to real estate markets in areas with legalized marijuana.

Key Findings:

  1. In cities with retail dispensaries, home values increased $22,888 more than in cities where marijuana is illegal from 2014 to 2019.
  2. Even in states that don’t have open dispensaries, but still have legalization in place see a drastic increase in home values. From 2017 to 2019, states with legalization saw a $6,337 increase compared to cities without marijuana reform.
  3. Cities with only medical marijuana programs do not see an abnormal increase in home values compared to retail markets.

The above findings show that legal recreational marijuana correlates with an increase in the real estate prices. Medical marijuana is not quite enough to cause a drastic economic boost, which is why states with only medical programs do not notice the same marijuana real estate opportunity.

What Do Recreational Marijuana Markets Do for the Real Estate Sector?

home value increase in real estate market after legalization
Courtesy of Clever Real Estate
Surprisingly enough, even homes close to retail dispensaries see a drastic increase in home value. Ever since Colorado’s first retail shop opened its doors in 2014, the city has seen insane growth. A CATO Institute Study shows that homes within 0.1 miles of a retail dispensary saw an increase in home values by 8.4% compared to other cities without retail cannabis shops.

  • The average home value in Colorado at the beginning of 2014 was $254,500.
  • Homes values are now averaging at $430,000 since the beginning of 2019.
  • Since Denver opened its retail marijuana shops, it saw a 67.8% increase in its residential property value.

Colorado is the prime example of how a recreational marijuana market creates significant growth in real estate. Marijuana and real estate work together to produce a thriving market with insane growth and potential.

Commercial Marijuana Real Estate

Aside from the ridiculous boom in home values in legalized states, commercial marijuana real estate is blowing up faster than anyone could imagine. As more marijuana businesses look into opening their doors in legal states, commercial real estate is killing the game. Some companies are needing ridiculous amounts of land for commercial grows, MIPs, and even dispensaries. As a whole, the real estate sector is falling in love with the rise of marijuana legalization!

Other Factors at Play in the Legalized States

Real estate in legalized states is a significant sector to be in for many reasons. Sure, the home values are increasing like crazy which means higher commission rates. That’s not all though; not only are homes selling for more than usual, but they are now moving off the market faster than ever. Legalized states have seen homes sitting on the market for fewer days than the national average, according to the Clever Real Estate study. Real estate agents are making bank with such a crazy demand for homes in legalized states. They can sell homes above market price, sell it faster than usual, and the homes sell themselves due to the heightened demand in legal states.

What to Pay Attention to in the Future

top of jar of cannabis flower

As marijuana legalization continues to spread and more states offer legal marijuana programs, it is likely the real estate boom will slow down. It is essential to keep an eye out for any decrease in the real estate market as it could cause many issues for the average person. If every state has legal weed, it no longer creates a unique demand. Sure, the economy is still likely to see an increase, but if marijuana legalization becomes the norm people won’t need to move to legal states.

In turn, the relationship between marijuana and real estate will fade into more of a commercial interaction and home values will begin to balance out across the nation. While it may seem like a great idea to go buy a home in a legal state to sell it in a few years for way more, the investment is risky and likely to adjust drastically if federal legalization occurs. Pay attention to the market and don’t make a hasty decision on a home. Be sure that even without legalization, the home value will sustain and continue to gain equity. Otherwise, people may find themselves in another housing bubble with no outlet.

For those already living in legal states, head to the Leafbuyer deals page for the best cannabis deals!