Housing ‘plateau’: Dickinson real estate stabilizes as housing expansion slows

Though contractors are still constructing speculative homes for market, Dickinson's housing boom has largely tapered off. With that slackening of a once-surefire sector goes at least one source of city revenue.

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Zach Mosbrucker, left, and his father, Kenny Mosbrucker, install flooring for a home on the northwest side of Dickinson. Mosbrucker’s company, Kenny’s Construction, is building the house with Legend Homes. (Andrew Haffner/The Dickinson Press)

Though contractors are still constructing speculative homes for market, Dickinson’s housing boom has largely tapered off. With that slackening of a once-surefire sector goes at least one source of city revenue.

As the city reforecasts its budget for 2016, the matter of declining residential building permits, and the amount of money they could cost the city both in permit revenues and in local economy, has been brought forward.

City Administrator Shawn Kessel said the city expects the number of permits issued this year to be “significantly down” compared to previous years, but that the trend does not come as a surprise.

“It’s not unanticipated based on quantity that has been built in the last three or four years,” he said. “Thousands and thousands, literally, of housing units - whether they be single-family or multi-family - have been constructed.”

In his State of the City address on Jan. 19, Dickinson Mayor Gene Jackson said the city predicted it would issue around 30 residential building permits, split between single-family and single-family attached homes, such as townhomes, throughout this year.


That sum does not include any multi-family dwellings and represents a drop-off of more than 50 from the total of 89 issued last year and an even sharper fall from the 286 permits issued in 2013.

Dickinson Building Official Leonard Schwindt, who compiled the 30-permit projection through information gleaned from conversations with area builders, said the current rate of housing construction in Dickinson is about what you’d expect for a town of its size.

Growth for this year, he said, will likely shift away from the multi-family structures that have been so prevalent throughout the boom.

“Single family and single-family attached is what I think we’ll see,” Schwindt said. “I hate to say we won’t see any apartments, but probably not.”

Schwindt said his projection was likely on the conservative side, but added that permit requests were already coming into his office from people trying to get on the city’s approval list for pouring footings and foundations.

Tax season could provide a further indicator of permit levels, Schwindt said, as potential builders and renovators gauge their ability to put in a new home or remodel an existing property.

While Schwindt said the current projection is not something his department is concerned about, it still “definitely gets our attention” in light of the activity of the last few years.

While he hoped to see his estimate fall on the low end of reality, Schwindt said the slow in permits “opens up doors to improve” the way the city regulates building.


“There is a good portion to this, as far as educating the inspectors and updating our education,” he said. “This is a good time to do that.”

While the slowdown provides an opportunity to catch up, it also has the less positive effect of reducing a funding stream for the city.

Kessel said the decrease in the number of permits will cause a subsequent decrease in the building permit revenues within the city’s general fund.

Last year’s budget saw a “significant” fall in that revenue source, he added, which mostly came in the fourth quarter of that year.

The reforecast, which Kessel said will likely be presented at the next City Commission meeting on Feb. 16, should see a cut of at least $2,000 in revenue expected from building permits, which are currently budgeted to yield a total of $400,000.

That amount is just one-third of last year’s budgeted building permit revenue of $1.25 million.

The actual revenue collected from permits that year was only a little more than $737,000, which required the city to draw the remainder form some if its cash balances.

Kessel said the “dynamic environment” of western North Dakota made it challenging to create a budget six months in advance, as Dickinson does, and that the city was no stranger to making alterations.


“For the last three years we’ve taken a good, hard look at that budget at some point within the year of its execution to make sure we remain on target,” he said.

Kessel added that this year’s permit estimates so far show a return to familiar territory.

“This is actually right on par with pre-boom levels,” he said. “This is kind of back to 2008, 2009 levels of growth in the city of Dickinson.”

Market is slower, but still building

Jason Fridrich, owner of residential construction company Legend Homes, said he is “definitely seeing a slowdown” so far this year, but also said the city projection seems to be on the low side.

“I think we’ll probably do more than that,” Fridrich said of the city’s residential construction sector and the estimate of 30 permits. “Obviously, I don’t think we’re going to get close to 100, but I see more likely in that 50 mark.”

As production slows, Fridrich said he’s seen home prices begin to stabilize as they reflect the increase in available housing.

Construction orders have decreased since November, he said, and while people are still looking to build, the total number has gone down.

Fridrich believed that trend would continue throughout the year.

“Until inventories come back into line, I don’t think we’ll see a big boom in people looking to build new houses,” he said.

During the boom years, Fridrich said, most of the houses he built were for new Dickinson residents.

Now, however, he sees that trend “shifting the other way, a little bit” as locals who “waited out the storm” look to build something themselves.

While Fridrich said he doesn’t believe the housing market is oversupplied yet, he said prices may still come down a little further to accommodate the higher inventory.

A decrease in the cost of materials and labor could also make new homes more affordable.

“It’s more of a buyer’s market than it was one or two years ago, that’s for sure,” Fridrich said.

Even with the slower start, Fridrich said he was anticipating a “fairly busy” year and that Legend Homes was still constructing speculative homes that will be ready for sale in the summer.

Fridrich believed many of the out-of-state contractors that operated in Dickinson through the boom have since returned to their own markets and that local builders would absorb the city’s would-be buyers.

While the year may be slower, the reduced pace would allow businesses to “catch up and settle things down a bit.”

“It’s going back probably to 2010, 2011, when it was just an average year,” Fridrich said. “Everybody stayed busy, but it just wasn’t the crazy, pull-your-hair-out busy like we’ve had the last few years.”

‘We’ve plateaued’

Even with the slowdown, last year was still a good time for local real estate, said Tracey Hoff, owner of The Real Estate Co. in Dickinson.

While he said it’s too early to judge 2016, Hoff said housing remains active and the increase in availability is good for buyers.

“In the past, if you went back to ’12, ’13 and ’14, (buyers) didn’t have a lot to look at - there was no inventory,” he said. “I think the buyers are benefitting from this, and I think it’s a great opportunity because there’s a little more selection and they’re probably getting more house for the money.”

Hoff said he was optimistic about the housing market, which he said was buoyed by favorable interest rates, a diversified local economy and extensive investments in quality-of-life improvements. Moving forward, he anticipated continued stabilization of both housing stock and rent levels in the area.

“I think the overall look is we’ve plateaued and everything has settled into place,” Hoff said.

Badlands Board of Realtors President Shirley Dukart described last year as “normal” and representative of the average pace of pre-boom home sales.

Board of Realtors data shows 279 total active listings as of Jan. 16 in the most recent collection of statistics, the only so far to include part of this year.

The median price of a home at that time was $259,900, about 13 percent less than at the same point last year. The median number of days a home spent on the market was 139, up by more than three weeks over last year.

The absorption rate, which measures the length of time it would take for all properties available right now to be purchased if no new ones entered the pool, has risen steadily from about 3.6 months last February to a little more than 8.1 months as of Jan. 16.

Dukart described recent times as being characterized by “supply over demand,” which she said is a reversal of the pattern of the boom years.

Of that period, she said 2014 in particular was “out of this world” in terms of sales.

“We don’t expect that to happen again, unless we would have everyone move back overnight,” Dukart said.

Still, Dukart was also optimistic of the housing market in Dickinson and said those who were buying homes now intended to stay, which didn’t always apply to homebuyers during the boom.

She also spoke to the pull of the city’s non-oil economy, particularly its medical and retail sectors, and said cost reductions made homeownership more accessible in Dickinson.

“People just couldn’t afford to come here and work with the high prices - but now they can,” Dukart said.

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