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Spotlight on Economics: Fargo Housing Market

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Lei Zhang, assistant professor in the NDSU Agribusiness and Applied Economics Department (NDSU photo) Lei Zhang, assistant professor in the NDSU Agribusiness and Applied Economics Department (NDSU photo)
Fargo Area House Prices Fargo Area House Prices
Home prices in Fargo and West Fargo have been increasing steadily.

By Lei Zhang, Assistant Professor

NDSU Agribusiness and Applied Economics Department

The average sold price of residential houses in Fargo and West Fargo has experienced a steady increase in the past two decades.

In 1991, the median sold price was $77,500, while in 2013, the median sold price increased by approximately 115 percent, to $166,900, hitting an all-time high. The average days on the market also hit a historic low of 23 days in 2013.

Thirty percent of the homes were sold within one week, 40 percent of the homes were sold within two weeks, and 73 percent of the homes were sold within two months. In a good neighborhood, if a seller isn’t getting an offer in the first week on the market, the house may be overpriced or not in attractive condition.

Nationwide, home prices rose by about 10 percent for 2013, which is similar to the Fargo area. However, the national trend largely is driven by the significant drop during the 2007-2009 financial crisis. In the Fargo area, house prices did not drop dramatically. We even saw a mild increase in 2007 and 2008.

The rising home prices in the Fargo area reflect supply and demand. In comparison with the steady supply in the housing market, the demand has been growing persistently due to the oil boom in the state, the local low unemployment rate and low mortgage rates.

According to the U.S. Energy Information Administration, oil production in North Dakota zoomed up 600 percent between 2007 and 2013. Even the recent drop in oil price does not affect the oil production permanently. North Dakota now ranks as the second largest oil-producing state in the nation. The soaring oil production has resulted in high population growth, and further high home prices and increasing rental prices.

Along with the oil boom, North Dakota has maintained jobless rates at nationwide lows. According to the Gallup Job Creation Index, the state has been home to the most jobs created in the country for five consecutive years. Between 1998 and 2013, the state added 132,000 jobs.

The state economy is growing at five times the national average. According to the U.S. Census Bureau’s American Community Survey one-year survey, the median household income for North Dakota increased from $52,784 in 2011 to $53,585 in 2012.

Compared with the median U.S. household income, North Dakota’s median household income was $2,214 higher in 2012. The increasing income made homes affordable. The home price-to-income ratio for Fargo is about 3, which is much lower than the nation’s average of 3.8.

Since the financial crisis, the Federal Reserve kept interest rates low to support the financial system and economy, which led to low mortgage rates in recent years. As a result, more home buyers chose to purchase homes and take advantage of the low mortgage rates. This further drives house prices upward.

In summary, the steady and strong economy causes the housing market prosperity in the Fargo area. This trend likely will not be reversed in the near future.


NDSU Agriculture Communication - Aug. 3, 2015

Source:Lei Zhang, (701) 231-9797, lei.zhang.3@ndsu.edu
Editor:Ellen Crawford, (701) 231-5391, ellen.crawford@ndsu.edu
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PDF - Fargo Area House Prices Preview
(NDSU_Eextension_Service_Fargo_Area_House_Price.pdf - 171.68 Kb)
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