- Average home purchase price has increased from $133,381 in 2005 to $162,068 in 2007 (17.7%).
- Average income only increased from $41,030 in 2005 to $43,753 in 2007 (6.3%).
- Many houses are selling for more than their appraised value
- Average apartment prices have increased 6.8% from 2007 to present.
- Average house prices in Minneapolis are now only 5.8% higher, with an average income 32.8% higher
Higher pay and better opportunities are amongst the most common reasons cited for North Dakotans leaving their home state, most notably to the nearest major metropolitan area – Minneapolis-Saint Paul.
Housing values all across North Dakota, have made sharp increases in recent years, while income levels have mostly remained stagnant. Western North Dakota has seen this more than anyone, mostly due to the increase in oil-related jobs. Williston’s prices have increased by 24% since 2005, due to an increased demand for housing from oil-related workers moving into the region. Like Williston, Bismarck too is growing, but is not at the heart of the oil fields.
Williston is reluctant to construct new houses or apartment buildings, fearing that the boom is only temporary and will result in many vacant buildings in just a couple years. Much of Bismarck’s growth is steady and permanent. Over the past couple years, Bismarck has had near record numbers of new house construction. Those, on top of existing homes, present many options for those seeking to purchase.
A recent search of Bismarck single-family houses for sale between $70K and $180K yielded 102 results. The claim for the sudden spike in house prices is increased demand. 102 houses for sale does not seem like there is a supply and demand issue resulting in an increase of 17.7% in housing prices over a two year period. The has been no official declaration of average prices from 2008 compared to 2007 in Bismarck, but it is expected to have once again increased.
In contrast, Minneapolis metro house prices have fallen 9.2% from 2007 to 2008. The average house price in the Twin Cities was only $175,000 last year, compared to an estimated average price in Bismarck of about $165,000. In further comparison, the median income in the Twin Cities was $63,898 for 2008.
The difference in income to housing for Minneapolis was 63.5%, compared to 74% in Bismarck. Minneapolis houses were only 5.8% higher, but the income was a whopping 32.8% higher. This suggests that a house is more affordable in Minneapolis than Bismarck.
Many in Bismarck claim that the region’s housing market is stable, as opposed to other regions of the country which is seeing a major downturn. Many believe Bismarck to be immune to the economic conditions of the rest of the country, but seem to forget that many businesses located in Bismarck have national ties. One notable company is Bobcat, which already has implemented a temporary shutdown.
The apartment industry is another clear indication that housing costs are not increasing in line with average income, increasing an average of 6.8% since 2007. This is closer to the increase in average income than house prices, however is still increasing at a faster rate than income. Demand was high for apartments throughout 2007 and into 2008, sparking the construction of several new apartment buildings. By the end of 2008, the demand for apartments was quickly diminishing. Now, vacancies are plenty.
Could this increase in apartment vacancies be an indicator of economic change for the region? Many houses for sale are also spending more than the average amount of time on the market before selling. This could be a clear indication that housing prices have increased far too quickly, which may now take a sharp downturn.