IMF declares US housing market growth ‘stronger than expected’
With homes sales up by more than 15% compared with a year ago, and house prices up between 7 and 12%, according to the July 2013 International Monetary Foundation country report on the United States, the US housing market is looking stronger than anyone expected.
The report emphasises the positive effect that government housing finance programmes have had. Combined with higher house prices, the result is that fewer homeowners are behind on their mortgage payments and fewer houses are entering foreclosure. The news comes as a relief after a bumpy few years for the US housing market.
Data from the US Census Bureau supports the positive picture, showing that across the US new housing units have resulted in a national housing stock growth rate of 0.3%. North Dakota is leading the turnaround, with an impressive state-wide housing growth rate of 2.3%.
The sharp increase in North Dakota is due to the ongoing oil infrastructure being developed as a result of hydraulic fracturing (or ‘fracking’) in the area known as the Bakken Formation. The massive growth of the energy industry in North Dakota has meant that the state has the lowest unemployment rate in the US, with thousands of workers attracted by the demand for staff generated by the oil companies.
The trend is one that is predicted to continue for decades. The KLJ Power Forecast 2012 estimates that North Dakota’s population will increase by 25% by 2032, meaning the state will need to house over 66,000 additional people in fewer than 20 years. No wonder, then, that North Dakota is leading the US in terms of house building.
Robert Gavin, CEO of North Dakota Developments LLC, has been working in North Dakota for a number of years and has seen the impact that the oil industry and the development of fracking have had on the state. He comments,
“The change in North Dakota in the past two years alone has been incredible. The influx of workers has put pressure on everything, from supermarkets to housing stock. I’ve seen workers earning massive pay cheques then sleeping in their cars or in tents as there simply aren’t rooms available. A number of ‘man camps’ have sprung up to provide temporary accommodation for the workers, but North Dakota needs long-term solutions, not quick fixes.”
The situation inspired North Dakota Developments to implement a more permanent housing solution. Their Great American Lodge site, which is due to open in October 2013, provides executive hotel suites for oil company workers looking for a more luxurious standard of accommodation. Each self-contained studio includes a kitchenette, spacious living space, desk area, bathroom and sleeping area with queen-size bed.
The company’s innovative investment model allows investors to purchase units ranging from a fraction of a studio (from $30,950) up to a full suite of six rooms (from $319,700), with projected rental yields of up to 42.07% per year.
Workers also benefit from communal facilities for living and socialising in, such as a fully equipped gym, kitchen and dining areas, pool and card tables, television/recreation rooms, a snack shop, free guest laundry, an indoor heated basketball court, ATMs, banking services and even a clothes store. High speed WiFi is available in all common areas and rooms – an essential feature for those migrant workers staying in touch with their wives and children ‘back home’ through video calling.
With tens of thousands more oil wells planned in the Bakken area over the next 15-25 years, it’s clear that companies such as North Dakota Developments will need to keep the housing stock coming in order to keep up with demand. Those watching the US housing market will be keeping a close eye on North Dakota, while the rest of the country learns from its example.