Rural housing prices more stable than in metros

Rural housing prices have remained more stable than their metropolitan counterparts during the recent crisis, according to a study published in The Main Street Economist, a publication of the Federal Reserve Bank of Kansas City.

Chad Wilkerson, a vice-president of the bank, attributes that to "better fundamentals in home prices" in rural areas. He notes that rural housing prices have always been more closely related to household income than in urban areas, so there was less of a "bubble" in rural areas. Also, new home construction in rural areas slowed at the first sign of the economic crisis, which left fewer unsold houses to drive down prices.

The rural housing market is not immune from the crisis, though. While not experiencing the housing inflation seen in metropolitan areas, rural areas did see housing prices grow slightly faster than incomes, a trend that Wilkerson says "may need to unwind somewhat." He adds, "With commodity prices falling sharply in late 2008, many rural economies are bracing for slower economic growth heading forward -- and, in turn, softer demand for housing." (Read more)