One reason rural housing prices haven’t dropped as far as those in the cities is that they didn’t rise during the boom years of 2000 through 2005.

Housing prices in rural America have outperformed those in the cities for the past two years, according to a recent report from the Federal Reserve Bank of Kansas City. That doesn’t mean rural housing prices have risen. They haven’t, reports economist Chad R. Wilkerson. But housing prices in rural areas, on average, have been relatively stable.

The good news in the rural housing market is partially a consequence of relatively weak markets in years past, according to Wilkerson. “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,” Wilkerson wrote in a report titled “Is Rural America Facing a Home Price Bust?”

From early 2007 until the third quarter of ’08, housing prices in rural areas have risen by two percent on average, according to figures released by the Office for Federal Housing Enterprise Oversight. During the same period, metro housing prices have declined by nearly 8 percent.

Housing markets vary from region to region, of course, but here again rural housing prices are doing well in comparison to the cities. Only portions of the Pacific region have seen sizable rural housing price declines since the beginning of 2007. Meanwhile, in the West South Central region (Texas, Oklahoma, Arkansas and Louisiana), an area where rural communities have been bolstered by a strong energy-producing and agriculture economy, housing prices outside the cities have continued to grow despite the national bust.

It stands to reason that rural housing would be looking good these days compared to urban markets — there was less rise in rural home prices from 2000 to 2005 so there was less air in the bubble when it finally popped. But why did rural home prices stay relatively low while urban housing shot up?

Wilkerson provides two likely answers. First, rural areas have in abundance what cities, especially fast-growing cities, lack: land. Home prices rose faster in coastal areas between 2000 and ’05 than in inland cities, because limited land and greater land use restrictions hiked the price of property. Rural property wasn’t under the same price pressures.

Second, Wilkerson surmises that “better credit underwriting standards by rural lenders” reduced the number of mortgages written for people with little income and no down payments. Credit may have been harder to get in smaller towns, and that may have kept the housing bubble from inflating as fast and as far as it did in the coastal cities.

The rural housing market hasn’t escaped the housing bubble and bust entirely. In most areas, Wilkerson reports, rural housing prices have been rising faster than personal income, “a likely unsustainable trend.”

This imbalance between income and housing prices was nationwide, but it was more pronounced in the cities. In metro areas (from 2000 to ’05), housing prices rose more than three times faster than per capita income. In rural areas, however, the ratio of housing price increases to income was 1.8 to 1.

Housing prices rose faster than income across the country, but the rates were higher along the coasts. This map shows the ratio of house price increases to increases in per capita inocme. Wilkerson writes that it’s hard to maintain housing prices that rise faster than per capita income.

What about the future? Wilkerson is optimistic. He writes that a “severe drop in rural home values seems unlikely.” One reason for that outlook is that rural homebuilders have made more sizable reductions in their construction plans than construction companies in cities. Having fewer new houses come on the rural market should help stabilize prices of existing stock.

Moreover, while metro regions lost jobs in the third quarter of 2008, rural America continued to add jobs during the same period. Wilkerson acknowledges that the rural economy was fueled in mid-2008 by increasing prices for land, grains, energy and other agricultural commodities. Those prices have since come back to earth, no doubt slowing rural economies and slackening the demand for housing.

These trends lead the Kansas City Fed economist to conclude that “rural home values are unlikely to rise appreciably in the years ahead.”

Still, not losing these days looks like a big gain.

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