Rural areas of the U.S. that have long been viewed as a refuge for affordable homeownership are now grappling with rising prices, limited inventory and increasing competition — pressures once thought unique to urban housing markets.
“Even the term ‘affordable’ feels like a relic of the past,” said Jake Vehige, president of mortgage lending at Neighbors Bank, who authored a recent report that analyzes housing conditions in rural counties with populations of less than 20,000.
“Mortgage rates have climbed from historic lows to more than double that in just a matter of years,” Vehige said. “Meanwhile, inflation and low inventory have pushed home prices to record highs.”
Inventory squeeze, financial access
The report found that rural housing markets are increasingly behaving like urban ones. While demand in rural areas remains lower overall, homes are still selling quickly.
A key metric, absorption rate — which measures how many homes sell relative to how many are listed — reveals a competitive landscape even in remote counties.
“We found something surprising; the majority of these areas also fell into the warm to hot range,” said Vehige, referring to markets where inventory is scarce and homes move fast.
Even modest demand, the report notes, can overwhelm supply in areas with limited housing stock, especially following post-pandemic population shifts.
Another challenge is access to mortgage lending services. The average rural county has only 5.9 bank branches, the study found, compared to 55.1 in non-rural areas. Many counties are classified as “banking deserts” that lack branches within 10 miles.
Vehige said this limits a borrower’s ability to get face-to-face financial guidance. It also creates hurdles for programs like U.S. Department of Agriculture (USDA) home loans, which are meant to assist underserved regions.
Poverty and homeownership gaps persist
Generational poverty also plays a major role in limiting rural homeownership.
Of the 353 counties considered persistently poor by the U.S. Census Bureau — where at least 20% of the population has lived below the poverty line for more than 30 years — 85% of them rural.
“Without the possibility of inherited wealth or the availability of family members who can act as co-signers, many rural buyers are locked out of traditional conventional mortgage options,” Vehige said.
Renters face the steepest affordability challenges.
In rural areas, 31.1% of renters spend more than 30% of their income on housing, compared to 17.7% of homeowners. The numbers are worse in urban areas, but the trend is similar as renting remains far less affordable than owning, the study concluded.
Limited support from mortgage programs
While there are many government-backed mortgage options and low-down payment programs like Fannie Mae‘s HomeReady and Freddie Mac‘s Home Possible, eligibility requirements can disqualify many rural buyers.
“USDA loans are much stricter, with eligibility based on total household income,” Vehige said.
Property condition restrictions also pose problems, especially in rural areas where aging homes may not meet safety or livability standards.
New construction, a potential solution to inventory shortages, is also hard to finance in rural regions.
Despite being technically eligible for government loan programs, the report shows that new homes are rarely funded through them due to strict guidelines and higher perceived risk by lenders.
In 2023, only 18% of new-construction home purchases were backed by Federal Housing Administration (FHA), Department of Veterans Affairs (VA) or USDA loans. The rest were financed conventionally or bought entirely with cash — an indication of the difficulty that low- to moderate-income buyers face when trying to build a home.
Rural advantage is shrinking
The report tracked home-price-to-income ratios, a key measure of affordability.
A ratio of 3.0 or less is generally considered sustainable. Rural areas have recently exceeded that benchmark but still lag behind urban markets, where ratios topped 3.95 in 2022.
This means rural homebuyers still enjoy a relative advantage, but it’s diminishing.
“While rural home affordability has floated above the 3.0 ratio since 2021, this relative affordability gives rural homebuyers an advantage, but it’s a fragile one,” Vehige said.
Without expanded access to flexible mortgage products and down payment assistance, more rural Americans risk being priced out of owning a home, he added.
“This shift has far-reaching implications, not just for individuals but for entire communities,” Vehige said. “Rural America still serves as a gateway to homeownership, but it’s under pressure.”
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