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Many of the arguments for risings US housing prices relate to events in metro areas. For example, some metro areas like Manhattan and San Franciso have limited land on which to build. Add in rising demand for living in these locations and rules that limit building, and the result is housing prices that rise faster than incomes. Another set of arguments is that in certain destination cities, either big US financial corporations or high-income foreign buyers or investors in short-term rental properties are looking to purchase homes, thus driving up prices.

But in most rural areas, none of these issues really apply. Land on which to build is plentiful, building codes usually aren’t highly restrictive, and buyers from outside the local area are not scooping up properties with the same vigor. But in rural areas, housing prices are rising faster than income anyway.

The Council of Economic Advisers provides a fact sheet showing some of the overall patterns in “The Deterioration of Housing Affordability in Rural America” (March 2025). The first figure shows income and rent for median-income rural renters; the second figure shows income and housing prices for median-income rural homeowners.
 

(For those interested in detail, “rural” is often defined as “not in an urban area.” CEA writes: “For purposes of this analysis, a rural area is one in which the population density is less than 250 people per square mile. With this definition, the estimated rural population in the United States in 2023 comes out to 58 million people, very similar to other estimates.)

It’s not at all obvious why this is happening. One possible explanation, for example, is that the new housing in rural areas has tended to be much more expensive than earlier housing, thus pushing up the average price. But if this was a big factor, then the average age of rural housing should be declining–as a result of this new building–and instead, the average age of rural housing is rising.
 

Another possible explanation is that the sustained period of low interest rates has cause homebuyers everywhere to feel that they could afford to pay a higher purchase price for a home–because the lower interest rate would hold down their monthly mortgage payments. But it’s not clear why this factor should affect rental housing. Also, if the supply of housing shifts only slowly, then households willing to spend more can drive up price. But shouldn’t the supply of housing in rural areas–with plenty of land and lower levels of regulation–be able to respond to any surge in demand? Or are regulatory constraints on building in rural areas stronger than I have previously believed?

The CEA doesn’t offer an answer here. But the report does point out: “Where housing is expensive and scarce, businesses also face greater difficulties recruiting and retaining workers. Rural America has much to gain if progress can be made revitalizing the growth of housing supply to drive greater affordability …”

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