#211. Home Prices in Rural AmericaPosted on
|Home Prices in Rural America
The Federal Reserve Bank of Kansas City has a great publication called The Main Street Economist, a bimonthly electronic newsletter that reviews the major economic challenges and opportunities in the Tenth District, both in rural and urban communities. The latest issue looked at housing prices in rural America. Below are excerpts from the issue entitled “Is Rural America Facing a Home Price Bust?”
“Rural America was largely bypassed by the national home price boom of the first half of this decade and thus seems likely to avoid much of the correction in U.S. home prices currently under way. According to the Office for Federal Housing Enterprise Oversight (OFHEO) index, since early 2007, home prices in rural areas have risen slightly more than 2 percent. Though small, this increase compares favorably with the severe decline of nearly 8 percent in metro-area home prices during the same period.
To see in general terms why rural home prices have not mirrored price drops in metro areas, one need only look at a longer history of home price trends. During the first half of this decade, the average annual price gains of homes in metro areas was nearly 10 percent, with gains approaching 15 percent in 2004 and 2005. By contrast, home price gains in rural parts of the country stayed largely in line with recent historical averages through 2003, before rising somewhat more rapidly from mid-2004 to mid-2006.
Since rural areas experienced much less of the home price boom of the first half of this decade, it stands to reason that now they are experiencing less of a bust. But why did home prices increase less in rural areas than in metro areas during the boom years? Two potential reasons stand out – greater availability of rural land and, perhaps somewhat better credit underwriting standards by rural lenders.
In conclusion, unlike metro areas, housing markets in rural areas of the country have suffered only a glancing blow from declining home values. Any future home price declines in rural America are likely to be much less severe than in cities. Still, rural home values are unlikely to rise appreciably in the years ahead.”
We at Boomtown Institute and Agracel have long touted the benefits of living in rural America. Our rural areas may miss some of those metro area trends, but the sky-rocketing home prices and subsequent bottoming-out, is one trend we are happy to bypass. The rural economy maintains a generally stable level, avoiding high highs and low lows. We will continue to watch the housing market in both the rural and metro areas.