The Living Challenge: North Dakota’s Residential Market

There’s no place like home, and any kind of move underscores that sentiment. But having a roof over your head is part of fitting into a new community and in North Dakota the definition of just what that roof is, and how easy it will be to get under it, is changing.

Crew camps, one facet of residential housing, provide temporary shelter for energy workers who haven’t had the time or resources to find housing during their 12-on, 12-off work schedules. Hundreds of hotel rooms under construction and coming online in the oil field communities provide housing for newcomers.

Many oil field workers coming into the state looking for work are coming alone, looking for a place to live before sending for families, said Mike Anderson, executive director, North Dakota Housing Finance Agency. Many are looking for housing outside the oil field cities, choosing to commute on seven and 10 day work cycles. “So we’re seeing an increase in demand for housing, both rental and home ownership, even outside of oil country, but it’s being driven by the increased population coming out west to work,” said Anderson.

“If it’s an appropriately priced house and their not trying to price gouge the buyer, those homes are usually under contract in less than a week,” said Mitzi Bestall, owner and managing broker of Bakken Realty out of Williston.

Multi-family housing is springing up to meet needs, though not fast enough to meet the demands of new residents, those displaced by flood and those who would like to come to the state to join military spouses at Minot AFB.

“In multi-family we have a lot of people that are building apartments because that’s a quick way to get people out of the man-camps or out of their temporary housing,” explained Bestall “There’s several hundred apartments that are being built now. Investors have purchased them and some of the developers themselves have held on to them and are renting them out. There’s usually a wait list to get into an apartment.”

Sales of new and existing homes is big business in North Dakota, and lack of enough housing to meet demand is one of the biggest challenges facing residential realtors. North Dakota’s population is growing fast. Residential housing is growing fast. Just not quite fast enough.

A B52 training squadron launched at Minot Air Force Base in 2009, adding 900 new residents to the area at the same time residential housing was scrambling to keep up with population shifts due to energy work in the oil fiends.

“Things were tight, and the building community was just starting to react,” said John MacMartin, president, Minot Area Chamber of Commerce. In a very tight residential housing market, light was just starting to show at the end of the tunnel when, on June 22, 2011, a flood swept through Minot. The Souris River, significantly above average levels because of heavy winter snowfall melt-off and heavy rainfall, overflowed, destroying or damaging 25 percent of the homes in the community.

“The light disappeared and the tunnel collapsed,” said MacMartin. “We went from having some flexibility in apartment vacancies to having, for all intents and purposes, zero vacancy rate in a week to 10 days. During the same time frame, I believe, it got to the point there may have been three, four, maybe five houses on the market for $150,000 and at the next jump everything else was over $350,000.”

Housing Boom

Construction is increasing across the state and the inventory of existing homes is low. In areas that haven’t seen such a real estate market before, homes on the market as little as 24 to 48 hours are receiving 10 or more offers, said Jill Beck, CEO, North Dakota Association of Realtors. “It’s a new market for our members. They haven’t dealt with anything like this in the past. Everybody is learning.”

Statewide, inventory is the biggest challenge. The price of existing homes is increasing as fast or faster than the population. In July 2010, the average sale price of an existing single-family home was $163,167. In July 2011 it was $170,440. In July of this year, it was $192,758.

“The ones I feel for are the young families,” said Beck. “With prices increasing, it’s harder for them to even compete with money coming in from the oil companies; they don’t need to go through the financing like somebody young who’s just starting out.”
Being upside down with a house back home can make it harder to rent as a newcomer in North Dakota, too. Background checks are prevalent and rents are high.

Then, there is always the concern that buyers in the North Dakota housing market today will find themselves upside down in their mortgages tomorrow.

“We’re hoping we can sustain [the economy] going forward,” said Beck. “There’s always the fear of a too rapid increase. We’ve seen it happen in other areas and hope it doesn’t come to us.”

To date, North Dakota has seen the lowest number of foreclosures during the financial crisis than any other state.

The good news about the boom is economic, of course. For every 100 houses built in the community, some 323 jobs are created, said Doreen Riedman, executive officer, North Dakota Association of Builders. Of those jobs, some are temporary, lasting the duration of construction, and others are ongoing.

The Association of Builders gathers information from 11 cities statewide, looking at economic impact of construction.

“We have more than doubled the number of single-family homes and that isn’t counting twin homes and condos or multi-family housing,” said Riedman.

Adding to the economy is the influx of out-of-state builders and contractors. The Secretary of State’s Office shows more than 10,000 licensed contractors in the state where at the start of 2011 there were 6,000.

It’s not just apartments and houses being built. In early 2011 there were roughly 2,000 hotel rooms in the Minot area. Eight more hotels are coming online in 2012, and a half dozen hotels are in the planning stages or under construction. By the end of 2013, there should be roughly 3,500 rooms in the area, a 75 percent increase in just two years – and occupancy rates are holding at about 85 percent.


Groups are coming together to find solutions to the housing crunch as cities expand, sometimes past their borders. In Minot, the Chamber of Commerce partnered with North Dakota Housing Finance Agency and U.S. Department of Housing and Urban Development to sponsor affordable housing workshops to explore low and moderate income housing.

Retail and restaurant services are struggling to keep pace in the rapidly expanding population centers in North Dakota. In Minot, for example, apartment rental rates can run $1,800 a month for a three-bedroom apartment, and a three-bedroom home may run over $2,500. Retail businesses that want to open in the area need housing at rates employees can afford on the salaries retailers are able to pay. Minot is rebuilding, just not as fast as everyone would like.

Financing for home buyers can be difficult. Credit is tight and not everyone coming into the state can find financing, especially if they’re leaving a home in another state unsold.

“Sometimes it can be a challenge for the individual,” said Bestall. “Some of them are coming from a market where they may have had to let their other home go into foreclosure or a short-sale and they can’t qualify. Companies are working with them to help them get into a home.”

Another factor with financing: North Dakota is considered a rural state, and rural building has a perceived “value gap,” according to Anderson. “The values of homes in rural areas are always suspect because of small markets. When you’re not in a boom situation it costs more to build in a rural community than it’s worth when it’s done. So you have a gap in value which is a collateral for the loan and usually the lender is going to demand more down payment before they finance. In a lot of instances, that requirement is greater than what the borrower can accomplish so it becomes a little difficult.”

There are programs that work with rural borrowers – USDA’s program is income-limited, but FHA programs also work in rural areas – but finding financing in a state where housing prices are rising faster than incomes are growing is a challenge.

Riedman is also seeing lenders asking for bigger down payments in the wake of the home loan reforms of the past few years. “The appraisal factor is a big area, too,” said Riedman. “The ability to get a good quality appraisal that really matches up to what the home’s value is tends to be difficult in some areas and timeliness of appraisals is a big concern. We need more appraisers in the state and we need better service from them.”

Keeping Pace With Demand

The 2011 flood in Minot was thought to have displaced at least 4,100 households. But when the school year started, the public school district reported there were only 41 fewer students in September 2011 than there had been the year before. People aren’t leaving the area, they’re rebuilding and finding new places to live and for those who might have left, more are moving in.

Rapid population growth is new in Minot. By 2010 it had taken 50 years for the population to grow by 10,000 new residents. Between 2010 and mid-2012, it’s grown by that much again.

“Our population census in 2010 was 42,000 people,” said Bruce Walker, owner, Coldwell Banker 1st Minot Realty, Inc. “Today the best estimate is 50,000 people based on public works projections and the number of meters being used for electrical and water.”

Construction of new multi- and single-family homes is trying to keep pace, but hampered by the need for new and updated infrastructure. In Minot the flood damaged sewer and roads and at the same time, there’s not enough room in existing sewer systems to tie in more homes. A $27 million water and sewer project is working its way through the budget process.

Some of the challenges to affordable residential housing revolve around having enough developed lots with infrastructure in place.

“We’ve seen the costs associated with infrastructure going up and up and up and so lot prices are higher and therefore the prices of homes will follow that,” said Riedman. Making certain there are enough developed lots to keep pace with building new homes is one of the biggest challenges in residential housing in the state. “There needs to be a partnership between developers and communities. That is happening in a lot of areas, but we just need more.”

Bursting Bubbles

North Dakota’s economy has been slow and steady for years. The state’s economic policies are conservative, and financial institutions making home loans mostly avoided the creative financing and sub-prime loans that led to the economic downturn in the rest of the U.S.

But when exponential population growth coupled with scarcity drives up housing costs in rapidly expanding cities, is there concern over a housing bubble like the event that caused the economic downturn so much of the U.S. faced in 2008?

Builder Terry Becker said prices in the Fargo-Moorhead area are rising at a very modest rate and were stable throughout the downturn. Though the area saw stronger housing starts in 2012, it’s growing at a steady rate. “It’s nothing like what I am hearing about the western part of the state.”

Regarding that western edge: prices in Minot are going up fast for both flooded and non-flooded real estate. Where before the population started shooting up, prices for single-family homes were between $195,000 and $200,000, now they’re running $289,000 average, with approximately three on the market in September for less than $150,000, according to Walker.

North Dakota Housing Finance Agency’s mission is to make certain everybody in North Dakota has an affordable place to live, said Anderson; the Agency works with affordable housing for low and moderate income households. The agency provides financing programs for first time home buyers and administers HUD Section 8 Assistance programs. With the current need for affordable housing in the state, the last legislative session authorized the Housing Incentive Fund which the Agency oversees: a $15 million authorization to build as much affordable rental housing as possible. Virtually all the funds have been committed to multi-family projects, said Anderson, and while it hasn’t solved the problem, it’s taken steps towards a solution.

“If everything keeps going with the oil activity the way it’s predicted, 15 to 20 years, hopefully everything can sustain itself,” said Beck. “In the Williston market, things are starting to stabilize as more homes are going up, because when it first hit we had the oil that went bust in the ‘80s, so people were very cautious about putting up new apartments and building new homes. It was fear of what could happen again. But now we’re seeing reports and projections and as long as the EPA doesn’t come in and shut anything down it’s sustainable for 15, 20, 25 years possibly, so builders are not as cautious. They’re still cautious, but not as fearful now to do new construction as they were two years ago.”

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