Out in the Country, Home Buying Isn’t Idyllic at All

Courtesy of Realtor.com

Country life might seem idyllic compared with the city—there’s a slower pace of life, a stronger sense of community, and way more home for your dollar, even including a nice plot of land. Farm stands with freshly picked fruits and vegetables! Hoedowns! Tractors instead of subways!

But the reality isn’t so simple. Or quite so pretty.

It turns out, affordable housing is tougher to find in much of rural America—home to about a fifth of the nation’s population—than in the country’s big cities and prominent suburbs.

“Rural areas across the country have not recovered from the Great Recession as well as bigger cities [have],” says Bob Rapoza, executive secretary of the National Rural Housing Coalition, a Washington, DC–based membership organization. “There are fewer people who want to live there.”

And those who do face a vicious cycle: The population decline means that no one is investing in these small towns, whether it’s to build houses or offer mortgages. Employers aren’t inclined to move to depressed areas and, of course, the reason that people left in the first place was a lack of good jobs. But rural living still holds a lure primarily for those who grew up there, and for some just looking for a change. Here are the main hurdles that they’ll face.

You’re unlikely to find a turnkey home

Remote areas typically don’t have many well-maintained homes for rent or sale—and even fewer that locals can afford.

Take Pawnee, a small town in north-central Oklahoma that’s been losing residents for decades. The median closing price of homes in the town was just $56,000, according to realtor.com® data. But while that may sound like a bargain, these homes often require extensive—and expensive—renovations and upgrades. That’s because the majority of the housing stock is more than three decades old. (And also because they’ve been ravaged by years of earthquakes due to the region’s fracking and horizontal drilling methods.) Anyone who has the means for something better typically purchases land where their dream home can be custom-built.

And in places where there are plenty of good-value homes to go around, it’s usually because residents have left the area as big employers and good-paying jobs have disappeared.

Without lots of employers, wages in small towns are about a third lower than in cities, at just $44,212 in 2015, according to the U.S. Department of Agriculture Economic Research Service.

That’s had a big impact on property values. Home prices have grown only 13.6% in predominantly rural parts of the country since they bottomed out in 2011, according to the Joint Center for Housing Studies of Harvard University. Meanwhile, they’ve risen 25% in more populated areas over the same time period.

Options for financing are limited

In San Francisco, Miami, and New York City, there’s a bank on nearly every corner offering a wide range of loan options. That’s not true in much of rural America. And even when there is a bank, it doesn’t offer the same sorts of mortgages.

In 2010, nearly 30% of all rural and small-town home loans were made by just 10 banks, according to the Taking Stock report from the Housing Assistance Council, a national nonprofit that helps build homes and communities across rural America. That same year, 35.7% of high-cost mortgages were awarded to rural residents.

“It would never occur to some people that a local bank might not offer a 30-year fixed mortgage,” says Jim King, president of Fahe, a Berea, KY–based nonprofit group dedicated to fighting poverty in Appalachia. But this is often the reality. Many rural banks don’t have as much capital to write long-term loans or mortgage specialists to find appropriate loans as big-city financial institutions.

In areas of persistent poverty, it may be extremely difficult to get a loan at all. Many families out in the country don’t make enough money to qualify for a loan. In response, some families are doubling up with multiple generations and even cohabiting with unrelated families. Kids are staying home longer than they (and their parents) might like. There are plenty of roommates.

And it can be difficult to find enough similar properties in more isolated markets to put together the accurate appraisals that lenders want before issuing mortgages.

From 2003 to 2010, when banks seemed to be writing mortgages for just about anyone with a pulse, 56% of home purchase loan applications were declined in rural areas, according to HAC’s report.

Despite the difficulties, homeownership is higher outside of the cities, with about 81.1% of households living in their own abodes, according to 2015 U.S. Census Bureau data. That’s compared with 59.8% in urban areas.

But the lack of lending makes it harder to keep those homes in good repair.

“The supply [of homes] that is there is more likely to be substandard than in other parts of the country,” the National Rural Housing Coalition’s Rapoza says. “People are poorer. … There are fewer banks, [so] there are less options for credit.”

There’s not much building going on in rural America

There are also fewer affordable homes being built in rural America.

Most of the new construction going up since the recession has been big apartment buildings in the 15 largest metros, says Robert Dietz, chief economist for the National Association of Home Builders. Despite lower land costs, single-family home construction lags in rural areas, he says.

He anticipates just 11% of new single-family homes will be built outside of urban and suburban areas. And more than likely, those are pricey, custom-built dream homes or vacation getaways.

Many of these areas don’t have enough middle-income buyers for new subdivisions stocked with hundreds or thousands of homes. So builders can’t take advantage of economies of scale (e.g., discounts on new flooring or lumber for buying in bulk)—and that nudges prices up.

Development costs are also higher in some parts of the country due to the natural terrain or the cost of putting in infrastructure.

Case in point: Zavala County, TX, not far from the Mexican border, in the Rio Grande Plain. Many of the county’s “border colonias,” or rural settlements, were developed before infrastructure such as water, sewage, or electricity was put in place. And in the sparsely populated area, the cost of installing it after the fact has drastically increased development costs.

Paired with expensive insurance and building requirements to combat the plain’s frequent floods, affordable housing has become even less accessible to cash-strapped residents, 33.4% of whom live below the poverty line.

The median home list price in the county is $165,000, according to realtor.com data. That’s well under the national average of about $270,000.

Government programs to help rural residents are on the chopping block

There are still some folks who can achieve the dream of deep-country homeownership—with some government assistance. But President Donald Trump’s proposed budget slashes funding for rural housing programs by almost half.

One of those programs slated to be eliminated, the U.S. Department of Agriculture’s Mutual Self-Help Housing, gave single mom Christine Tighe, 28, a boost into homeownership.

Tighe was struggling to rustle up $900 each month for her three-bedroom rental home in rural Riverview, FL, on the outskirts of Tampa. But that didn’t stop her landlord from increasing the rent every year. When the price finally hit $1,100 a month in 2011, Tighe, a waitress at a nearby casino, knew it was time to move.

“I didn’t want to spend all my money renting,” she says.

The problem was that there weren’t many available rentals—and even fewer that she could afford on her tight salary.

Frustrated, Tighe filed an application to get her own home through the USDA Mutual Self-Help Housing program, which has helped about 500,000 low-income folks in rural areas build their own homes by contributing their labor. When her application was approved, Tighe and seven other households of soon-to-be-neighbors invested more than 600 hours of sweat equity in their future homes by installing drywall and caulking tile.

In November 2016, Tighe moved into her own four-bedroom, two-bathroom house in Ruskin, FL. Putting no money down, she was able to secure a fixed-rate mortgage with payments of just $650 a month.

But such housing assistance programs “are few and far between in rural America,” says Lisa Pruitt, a law professor at the University of California, Davis, who specializes in rural poverty. “It often makes it very hard for families to crawl out of poverty.”

The wealthy are squeezing out the rest

Of course, not all rural areas face the same challenges. In some, remoteness is part of the draw for wealthy buyers, spurring the local economy but spelling challenges for those who work there.

In celebrity-studded Jackson Hole, WY,  a scenic ski resort town with a population of about 10,500, even the 1% struggle to buy homes. About 97% of the area’s stunningly beautiful landscape is federally owned. This limits the number of houses, which drives up prices.

For low- and middle-income buyers and renters, trying to find a home is like searching for a lost Apple AirPod in a blizzard. One-bedroom condos there start around $325,000 or so. A 200-square-foot rental studio goes for about $950 a month.

It’s a housing environment that forces many working-class locals to live in neighboring Idaho, driving over the Teton Pass, a high mountain road that sometimes gets shut down for avalanche control.

To make ends meet, waiter and ski instructor Nathaniel Haygood, 30, splits a two-bedroom, roughly 750-square-foot condo with one full-time and one part-time roommate in Jackson Hole. Haygood would like to one day buy a home in his beloved mountain town. But homeownership feels completely out of reach in this market, where the median list price is $1.3 million.

“I want to make it work here,” Haygood says. But “I don’t know if I’ll be able to swallow paying rent for the next 40 or 50 years.”