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Housing market in Watford holds steady

Posted 3/24/15 (Tue)

By Amy Robinson
Farmer Staff Writer

While low oil prices may be slowing down drilling activity in much of the state’s oil patch, Watford City is still seeing a big demand for housing. McKenzie County, which leads the state in oil and gas production, has 50-plus rigs currently drilling into the Bakken Formation. And city officials say that housing and rental markets remain steady.
“The long-term economy that naturally surrounds oilfield production of this size is what we continue to build toward,” says Watford City Mayor Brent Sanford. “So far, no oil companies are saying that they won’t drill their planned share of the 60,000 wells yet to be drilled. So the eventual size of the community doesn’t change - just the pace of the growth.”
Even though oil prices continue to be low, city officials aren’t seeing the housing market or rental prices dropping in the area. Instead, they have been in somewhat of a holding pattern. And with an incredible amount of construction going on and slated to start in the upcoming months, not only are local families and individuals continuing to rent and buy homes, temporary housing is filling up as well.
“What I am hearing is that the housing sales and rental market is still price-driven,” says Gene Veeder, executive director of the McKenzie County Job Development Authority. “We still haven’t really seen prices drop. Prices are still kind of in a holding pattern. And in my opinion, there’s still a tremendous amount of construction going on. And the upcoming construction season is filling up those temporary housing units.”
According to Veeder, the factors that were driving the market last year are now changing a little.
“A lot of rental places are looking for different leasing terms – shorter terms because people are unsure of the gas and oil market right now,” states Veeder. “But single family homes look like they are still selling fine, and I think the temporary housing out there is filling up.”
According to Katie Walters, managing partner for Homestead Management who manages Madison Heights, one local apartment complex development, a lot of people are still looking for temporary housing. But with people nervous about their jobs because of the current oil and gas market, her company has had to reevaluate their leasing options.
“With people nervous about their jobs, they are nervous to sign into 12-month leases,” said Walters. “Rental prices are coming down, in the form of specials, but we are trying to look at the current market before setting more permanent prices. We still have our 12-month lease with specials going on, and we are willing to entertain a six-month lease as well for our residents.”
With construction costs still high in the Bakken, it’s important for investors to make their money back. There is kind of a dance going on right now, according to Walters. She feels that the developers really do want to get people in their units; they just have to be mindful that people are concerned with the job outlook right now.
Currently, Madison Heights has about 80 units that are ready to be filled in three separate buildings. The first building opened in December and two additional buildings are just now coming online, according to Walters. And they are serving both corporate and individual leases.
“Because of the timing of the first building opening in December, and being that it was around Christmas, we didn’t fill up very fast,” said Walters. “We also manage some modular cabins, and when people left for Christmas, they didn’t come back. But with construction coming up in the summertime, I think the units will fill up. When people start seeing the oil and gas market hopefully come back up, I think people will feel better and more confident in their housing and rental options.”
Madison Heights is currently working on a fourth building. Once the weather starts to warm up, vertical construction will start on that building. The owners have plans for additional buildings, but will probably hold those plans until next year, to see how the first four buildings do and how the market plays out.
“Rents don’t seem to be coming down for apartments or duplexes, but I have heard of lease rate and lease-term reductions for modular and camper type of rental units,” says Sanford. “If the newly constructed apartments don’t fill as soon as expected, and if hotel occupancy and rates begin to decline this summer, there may be some downward pressure on the rent levels. Time and the West Texas Intermediate oil price will tell.”
“The owners would like to attract more families,” says Walters. “But people are still waiting to see what’s going to happen to the prices and the market before committing. The units are really not affordable to a family where just one person is employed. So once the market stabilizes or prices start going back up, I think it would provide more confidence for the people here.”
Walters would like to see an end to the need for man camps, RV parks, and mobile home parks. She feels that being able to offer families a permanent situation where they are comfortable is their ultimate goal.
“I do feel bad for these families just biting their tongues right now,” says Walters. “Families have been up here for not just months, but years. And now they’re just waiting to see what happens. The benefit of having these permanent apartment buildings is getting these families in something more permanent and comfortable.”
In spite of temporary housing starting to fill up, housing and rental prices are not coming down. Man camps are still renting out rooms and oil companies have continued to reduce housing allowances and stipends because of the current oil and gas market.
“Oil companies have been in the process of reducing per diem housing allowances for a few years now,” said Sanford. “That trend should continue as we move more into the production phase of the Bakken play. But from what I am hearing, man camps are still renting out rooms for the construction season for pipeliners and contractors.”
According to Randy Pruett, Pierpont Communications for Target Logistics, a global provider of workforce housing with a location currently in Watford City, Target Logistics’ utilization (capacity) remains high.
“We have not altered the way we’re doing business,” says Pruett. “Our commitment is to deliver a best-in-class guest experience per our mission statement - ‘help our customers throughout the world realize their full potential.’ Target Logistics intends to continue to deliver on this commitment on a daily basis regardless of the price of oil. There are no planned layoffs or closures.”
And according to Pruett, one of the best parts of modular housing is the ability to move it where needed, which is what they recently did. They needed more rooms at their Watford City location, so they moved five dorms (or wings) from the Tioga Lodge (for a total of 180 rooms) to Watford City. The lodge in Watford City now has a total of 510 beds for lodging.
The hope now is that oil prices will start to come back up. Even though prices are low right now, it hasn’t scared people away like many people thought it would.
Construction is continuing and hasn’t stopped. Just like oilfield companies have had to get more creative with the current oil and gas market, so have the housing and rental market leaders.
“Developers are continuing with plans to construct single family homes this summer, in addition to continuing the build out of the duplex and apartment rental property construction projects that began last year,” says Sanford. “Hotel, restaurant and commercial construction projects are continuing as planned. Some are moving slower, but not stopping. We have seen some bids come in lower than expected on city projects. Developers have seen some reductions from expected bid levels as well. But the quality and number of bidders has been positive.”