Economist's Commentary: March 18, 2008
Rural America
By Lawrence Yun, Chief Economist
Rural America makes up only about 10 percent of the U.S. population and does not get much attention. Still, 30 million people live in areas considered outside of metropolitan regions. Widely cited home prices have been falling in many metropolitan markets; NAR data points to half of the metro markets in America with falling prices. The picture is decidedly different in rural America.NAR data points to half of the metro markets in America with falling prices. The picture is decidedly different in rural America.
In a first-ever thorough analysis of mortgage data by OFHEO of non-metro areas, it was discovered that all states but five showed a price increase in the final quarter of 2007. Wyoming led the pack with near double-digit price appreciation. California and Nevada were at the bottom. However, both states are coming off an exceptional run-up in home prices from 2000 to 2006. For example, even with the latest price drop, a homeowner in rural California would have seen a 115% price gain from 2000 to 2007.
NAR has not been capturing the housing market trends in rural America as much as we would like. We will be putting added effort to collect data from places we instinctively know to be where the American character of hard work and self-reliance is most evident. These are also the regions where subprime lending was least prevalent, and hence, less subject to foreclosure problems.
Rural America reinforces the notion that real estate is all local. Homes simply cannot be picked up and traded as easily as stocks and bonds or as wheat and oil. Homes carry the local characteristics of their local community. People take pride in owning a piece of America.
Rural America also reinforces the notion of solid investment return over a longer-time frame. In all states — over a holding period of the last seven years— prices rose. Ohio was the laggard, yet it still recorded a solid 24% price gain since 2000. There were very few housing flippers — or shall I say gamblers — in rural America. Whether in casinos or on Wall Street at times, fortunes can be made quickly or lost overnight. Bear Sterns made a bad gamble and is rightly being punished for it. Some, perhaps, will hang up their hats from fast city life and seek the peace, quiet, and genuine rugged self-reliance in the fresh country air. That is what a country home can provide. A steady long-term home price gain is a just an added side benefit.
This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >
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