2013 North Dakota Housing Market

North Dakota´s oil boom is invigorating the state´s real estate market, with the growing number of new residents looking for housing. Miami Beach

According to Realtor LaDonna Korstad, who is based in the Fargo-Moorhead area and licensed in North Dakota and Minnesota, “The number of active listings will remain steady throughout 2013 but the number of days on market will lessen as buyer demand will remain high.¨

North Dakota median home prices and interest rates will rise slightly but not so much as to discourage first home buyers. ¨The oil production boom in the western part of North Dakota is also contributing to the population growth and may present more challenges for first-time home buyers as affordable housing is limited,¨ said Korstad. ¨However, there seems to be an abundance of willing and able builders to make up for the difference.”

At the end of 2012, North Dakota saw its home prices increase by 7.1 percent, and its unemployment rate drop to 3.0 percent, the lowest in the country. The state did not experience substantial home price declines or severe unemployment as the national economy cratered between 2007 and 2010. Home prices during that period actually rose 17 percent, the highest in the nation.

For the period from the first quarter of 2013 to the first quarter of 2014, prices are forecast to rise 2.8 percent. Over the period from the first quarter of 2012 to the first quarter of 2017, the annualized rate of home price improvement is predicted to be 3.4 percent.

The Bakken Formation oil boom, or ¨Black Gold Rush,¨ as some call it, is attracting real estate investors from neighboring Minnesota and beyond. An article in RealEstateJournals.com (¨Time to open a branch office in N.D.?¨ March 27, 2012) quoted a variety of experts and officials on the subject. ¨This is a new North Dakota,” said North Dakota economist Ralph Kingsbury. ¨For better or for worse, this is a new state.¨

The trend of an oil-fueled economic surge is bound to continue indefinitely, said John Harju, associate director for research at the University of North Dakota Energy and Environmental Research Center. “So we think it’s an industry, it’s not a boom,” he said, adding that now is a good time for real estate developers to invest in insfrastructure to support the burgeoning oil industry.

According to the article, ¨some North Dakota and Minnesota investors and real estate professionals are already trying to capture their share of the market. … A Minnesota developer who was one of first to recognize the opportunity in The Bakken is Dean Dovolis of Minneapolis-based DJR Architecture Inc. Through an entity called Annabelle Homes, Dovolis and his partners expect to be developing residential communities in up to 30 small towns in western North Dakota, including projects now underway in Stanley, Columbus, Tioga and Kenmare.

¨Although Annabelle Homes was created only 15 months ago, the firm’s first project is already complete – a fast track approval, permitting and development process that would be all but impossible in Minnesota.¨

The North Dakota housing shortage is obvious in places such as Williston, which has doubled in size to 20,000 people since the oil boom took off in earnest in 2008.

A Wall Street Journal article (¨A Boomtown is Born in North Dakota,¨ Nov. 14, 2012) reported that ¨private-equity firm KKR & Co. is trying to capitalize by making a multimillion-dollar bet on a housing project in a town at the heart of it all. KKR … will develop a sprawling master-planned community that could become a modern-day Levittown on the North Dakota plains. The project in Williston is expected to serve some of the thousands of workers pouring into the region who are searching for jobs but facing inadequate housing.

¨´The population is going to double or triple over the next handful of years,´ said Ralph Rosenberg, head of KKR’s real-estate team. ´We have in many respects a first-mover advantage.´

¨The KKR project, being developed with two partners over a 164-acre area, will include 810 apartments, 737 single-family homes, a park, sports fields and other facilities, according to KKR. When completed, the new community is expected to provide housing for about 4,000 people.

¨KKR and its partners plan to spend up to $150 million to build the Williston apartments and to prepare lots to sell to home builders. Analysts estimate it could cost another $150 million to build those homes.¨

KKR predicts its homes will sell within the range of the current market: $200,000 to $400,000.

¨Tom Rolfstad, executive director of Williston Economic Development, said some longtime residents grumble that this boomtown is no longer an attractive place to retire and that lines are getting too long at movie theaters and restaurants. But he said the new housing is sorely needed to boost the existing shortfall. ´We need investment on this kind of scale if we are going to going to get any parity between supply and demand,´ he said.

¨Rolfstad said a half-dozen investment firms are starting or planning residential projects in the town, though none are on the scale of what KKR is undertaking.

¨Because there are few, if any, comparable developments, skeptics say KKR will have to rely on rough cost estimates. The firm and its partners also will have to look beyond Williston to find enough construction workers, and these people will need places to live while they build new homes. Also, a plunge in oil prices could dry up production in the Bakken.

¨KKR already has deep experience in North Dakota oil, giving it confidence the city’s expansion will continue. Last year, KKR spent $7.2 billion to purchase energy company Samson Investment Co., which has North Dakota wells in the Williston area.¨

The Bakken Formation Oil Boom has had unanticipated real estate effects, such as new North Dakota residents purchasing second homes in Arizona, according to USA Today (¨North Dakota oil boom fuels real estate sales in Arizona,¨ Jan. 1, 2012).

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