Looking at the current state of the U.S. real estate market, the conversation quickly turns to historically low inventories, increasing sale prices and not enough construction to meet demand.
But that’s not the whole story. Outside major metropolitan areas, when a large employer closes down or relocates to a big city, it tends to leave collateral damage in its wake. Populations decline as residents move elsewhere for work, property values can drop as a result of the decrease in demand and other businesses suffer from a lack of customers.
Especially when faced with the possibility that it may be your employer moving out of town, the prospect of a drop in home values or demand can be scary.
However, the loss of a major employer in town doesn’t have to spell doom for a small city or town, nor does it guarantee you’ll be dealing with plummeting property values – at least not more so than other small-town real estate markets facing general population decline.
“Every little town is different,” says Scott Rodgers, a Realtor, and owner of Rodgers Real Estate Group, a part of Re/Max in Peoria, Illinois. “Some towns and areas, the prices have dropped more than others. Some haven’t dropped at all.”
Peoria made headlines earlier this year following the announcement that construction equipment company Caterpillar, long headquartered in Peoria, would be relocating to the Chicago area.
While Caterpillar’s executives have been relocating up to the Chicago area, the engineering and production jobs are remaining in Peoria. “When the news first came out about Caterpillar, yeah, it was devastating because we didn’t know what was going to happen,” says Laura Booher, a real estate agent with Century 21 Lincoln National Realty in Peoria.
But the mixture of other manufacturers and healthcare institutions in the area and the fact that Caterpillar’s existing manufacturing is staying put for now means “the worldwide economy still has a lot of play in Peoria,” Booher says. While the real estate market has slowed on the higher end, she notes it remains active in the biggest segment – between $120,000 and $150,000.
A town that has already experienced this transition is Paducah, Kentucky. The small city lost a major employer in 2013 when the Paducah Gaseous Diffusion Plant shut down. The plant produced enriched uranium for nuclear reactors beginning in the 1950s.
Located along the Ohio River in western Kentucky, Paducah has a population just over 25,000. While the population has consistently declined from its peak of just over 34,000 residents in 1960, local Realtor Ben Sirk, owner of real estate firm Sirk & Company, says Paducah has managed to avoid much of the mass exodus typical of a small town that loses a major employer. Its prime waterway location means major shipping companies have locations or are based in and around Paducah, and Sirk says the shipping industry is the biggest source of employment. As a result, while property sales experienced some aftereffects from the plant shutdown, Sirk says the market has since normalized and median home values continue to grow year to year.
“Being a smaller town, we don’t see a lot of the real highs or the real lows. Fluctuation is a lot more minimal with those ups and downs,” Sirk says.
Towns, where the only employer shuts down or leaves, may undergo a complete rebranding. Jerome, Arizona, began as a copper mining camp in the 19th century and reached its peak population of 15,000 in the 1920s. The decline in copper demand closed the local mine in 1953, effectively reducing the population to between 50 and 100 shortly thereafter. In recent decades, however, the small population has managed to capitalize off the loss of residents that left the town all but vacant – and the Jerome tourism site marks it as “the largest ghost town in America.” With a tourism industry in place, Jerome’s population has climbed to 455 residents in 2016, according to the U.S. Census Bureau. Properties currently on the market range between $150,000 and $745,000.
Whether you’re selling because your job’s taking you to a different town or you’re worried for a loss of opportunity in your small town, rest assured that the real estate process largely remains the same. It’s simply a matter of approaching your home sale with the right perspective.
Call a pro first.
If you’re concerned about a drop in demand as people move out of town for new job opportunities, taking it on alone can only be more stressful. Sirk stresses that a seasoned real estate agent will have weathered the housing market during a previous economic downturn and will be able to help you manage your expectations as it pertains to the local situation.
Lower your price expectations, though that’s not always the case.
As people move out of town, a drop in demand for housing is an obvious side effect. As a result, Rodgers notes: “The prices are going to drop.”
However, that doesn’t mean prices are going to plummet all over town. Both Booher and Sirk point out that while parts of the market have seen some decline or may be staying on the market longer, median sale prices are still going up year-over-year in both Peoria and Paducah.
“The impact that [the Gaseous Diffusion Plant closing] had was minimal, almost to the point that it was not noticeable or felt by the majority of the population, including by the people that bought and sold homes during that period,” Sirk says.
Take advantage of affordability if you’re staying.
Where prices do drop, however, it may be a great opportunity to buy a house that’s the next step up if you’re staying in town. Booher says the increased number of higher-end homes on the market in Peoria means buyers have the advantage, “giving people the opportunity to move up when they otherwise wouldn’t have been able to.”
Consider holding on.
As long as there are other employers in town or nearby, there’s a good chance the town will be able to weather the storm – and therefore no need to flee for fear of plummeting home prices. Weigh the possibility of waiting out the local downturn, then selling once the market has recovered.
Booher recalls previous years in Peoria when Caterpillar or other employers were laying off workers – prompting the joke that the last person out of Peoria should turn the lights off – but it proved to be part of a larger cycle. “We decided to keep the lights on, and we did survive,” she says.
Get active in revitalization efforts.
If you are willing and able to hold onto your property until you feel more confident in property values, don’t be a passive member of the community. Help spur a faster turnaround by getting involved in city planning, revitalization efforts or advocating for tax incentives to help encourage new employers to open up shop in town.
A May 2015 report from the U.S. Environmental Protection Agency that examined how small towns and cities can rebuild their economies notes that concentrated efforts to encourage rehabilitation of downtown main streets decreased retail vacancies and appeared to bring more interest to the city from businesses and residents alike.
“[Paducah’s] been saved from just going into oblivion, because a lot of these smaller towns just end up wasting away, so we’re hoping ours doesn’t, and so far it’s not,” Sirk says.
Courtesy of US.NEW and credit to Devon
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