People in most housing markets are elated about trends showing home prices are on the way up and a housing recovery could be underway.
If you're living in parts of North Dakota, however, you have lived with rising home prices for a while now. Moreover, shortages in supply are making it a challenge even to find a place to live.
Local markets, especially in the western part of the state, are booming due to increased oil production in the Bakken Formation. Only Texas produces more oil than North Dakota these days, thanks to advances including hydraulic fracturing and horizontal drilling.
And that is creating a dire need for everything from new housing to commercial development.
At a recent conference in Chicago, sponsored by the Midwest Real Estate News, Minnesota Real Estate Journal and Illinois Real Estate Journal, a parade of marketers, developers and other interested parties told story after story about how communities are struggling to keep up with growing population in North Dakota. Meanwhile, housing prices and rental rates are on the rise due to increased demand.
It is not uncommon for some workers who have migrated to the area for employment to sleep in modest accommodations called "crew camps," or even in their cars. For them, the sacrifice is worth it: The average wage in the oil and gas extraction industry was $89,020 in 2011, well above the statewide average of $40,914, according to the North Dakota Petroleum Council.
While some are content with their temporary living arrangements, others who head to the Bakken are seeking a place to live.
"When I moved here in 2002, there were a lot of houses on the market," said Jeff Zarling, president of Dawa Solutions, a business development and marketing firm located in Williston, N.D.
Not only is that not the case today, but prices are much higher.
In 2002, a 1,800 square foot home in Williston cost in the $80,000 range, he said. Today, a comparable 2,000 square foot home built in 1978 is listed for $327,000.
The average price of a single-family home is currently $227,274 in Williston, compared with $172,948 in July 2011 and $129,183 in July 2009, according to the Williston Board of Realtors.
Meanwhile, in 2002, rent on a two-bedroom apartment might have averaged $340 a month, Zarling said. Today, a developer is proposing a complex where rents on 2-bedroom apartments will range from $1,755 to $2,700 a month, he added.
There is also an increased need for services in the area, and some developers are looking into the opportunities. A speaker at the Chicago conference said it can take weeks to get a haircut appointment in the area, for example, and people are best off scheduling their next oil change while they are getting one done.
Zarling's company has been involved in the marketing of the area to the rest of the country, partly through investor conferences about the Bakken in Minot, N.D., and also through a field tour that takes potential investors through key sites. Organizers are considering taking the conference on the road, possibly making presentations in the Southwestern and/or Southeastern regions of the country. They may even schedule a conference for investors in New York.
"We truly believe that one person's problem is another person's opportunity," Zarling said. "The largest [problem] is the need for housing." One estimate provided at the Chicago conference suggested there could be pent-up demand for as many as 6,000 housing units in Williston alone, he said.
There are a number of other communities also in critical need of housing.
Minot, for example, is a community that now has an estimated permanent population of between 46,000 and 47,000 people, said Jerry Chavez, president and chief executive of the Minot Area Development Corp. That is up from about 38,000 two and a half years ago, he said.
The price of an average single-family residence was $246,000 at the end of the first quarter, said Todd Fettig, president of the Minot Board of Realtors. That's up from $197,600 in the first quarter of 2010 and $125,000 in the first quarter of 2008.
The town's housing shortage was compounded by last year's devastating flood in the area, in which 4,100 homes were lost, Chavez said. About 2,000 homes are scheduled to be built by the end of this year, and apartment and hotel projects are also under way.
Of course, not everyone is flocking to invest in the area. More than one speaker at the Chicago conference said the biggest question investors ask is whether this oil boom is here to stay. Plus, environmentalists say the new drilling technology can have negative effects on the environment, including to an area's groundwater.
But right now, there are more than 200 oil rigs operating in the state, and each active rig provides about 120 direct and indirect jobs, according to the North Dakota Petroleum Council.
"We don't call it a boom, we call it an industry," Chavez said.
Source: Wall Street Journal