Tag Archives: realtors in Dickinson North Dakota

Banks Don’t Want To Lend, Or Own Property In Dickinson, And It Is Causing Real Estate Prices To Fall

Banks in Dickinson, North Dakota do not want to loan money on property, and end up owning property in Dickinson, and it is causing real estate prices to fall.  No matter what people in Dickinson say or think about the economy in Dickinson remaining steady or improving, the Banks think the opposite, as demonstrated by their current lending practices.

The Banks don’t want to loan money on property in Dickinson because of the following doubts about Dickinson:

  • The Banks believe that real estate prices in Dickinson will continue to fall.
  • The Banks do not want to have loans on properties that are depreciating, which people would walk away from when they owe the Bank more money than their home is worth.
  • The Banks believe that the economy in Dickinson will continue to decline, with fewer jobs, lay-offs, businesses closing, and wage rates continually decreasing.
  • The Banks do not want to loan money based on people’s income history in Dickinson, because they believe that many people will lose their job, be unable to find another job, and their wage rates will continually decrease.
  • The Banks believe that people in Dickinson will default on their home loans, because they will get laid-off, be unable to find another job, their wage rates will drop, or they will find out that they owe more money on their home than it is worth as its value depreciates.
  • The Banks believe that they will likely end up owning many properties in Dickinson because of people defaulting on their mortgages.  The Banks believe that these properties will be depreciating in value greatly, they will be unable to find qualified replacement buyers, and the Bank will be responsible for paying insurance and high property taxes on these properties for many years.

In order to not have problems, the Banks are trying to not lend money on houses in Dickinson, because they don’t want to end up owning many, many houses in Dickinson.

The Banks don’t care, that the depreciation of home values that they are so worried about, they are perhaps the primary cause of this right now.

I will give two quick examples of home buyers who were willing to pay the seller’s asking price, but the Banks would not loan money to any of the buyers, so the home price dropped 10% to 20% in less than one year.

A friend of mine who has lived in Dickinson for 35 years, currently owns a home with $20,000 remaining on his mortgage.  I believe his current mortgage payments are $300 per month or less.  He is single, and a couple of years ago he no longer had to make child support payments of $700 per month or more on his two children, as they are now grown.  He has worked at the same company for over eight years, and his take home pay after all taxes is at least $3,000 per month. He owns several vehicles, which are paid for.

He agreed to purchase a neighboring house for $134,000, which was less than the current appraised value.  He thought that he would have no problem getting a mortgage for this house, based on his income, his employment history, his large equity in his current home, and having no car payments, credit card debt, or other debt.  But the Banks in Dickinson denied him a home loan.

If you use an on-line mortgage payment calculator, the mortgage payment for the $134,000 house would be less than $900 per month, plus his current mortgage payment is $300 per month.  For a single male with $3,000 per month income after all taxes, with no other debts, why couldn’t he afford $1,200 per month total for home payments?

The Banks did not want to make a home loan to him with payments of less than $900 per month, but for twelve years on his income he had paid nearly this much every month in child support.

Within less than one year, the seller’s asking price for this home that he agreed to buy for $134,000 had dropped to $120,000.

This second story is about my experience.  I own a home in Idaho which is paid for, but I have been working in Dickinson for almost six years.  For about three years, I was a roommate of a home owner in Dickinson, where I paid about $480 per month.  Once the Oil Boom ended, and so many out of state workers returned to where they came from, apartment rents in Dickinson decreased greatly, and I rented an apartment for less than $400 per month.  However, I wanted to get out of this apartment, because I had some bad neighbors.  I saw a very inexpensive manufactured home for sale in Belfield, on its owned land, so this was something that I was interested in buying:

A trucking company in Idaho, that was doing business in North Dakota, wanted to buy housing for three of its truck drivers, so this trucking company purchased a 3-bedroom single-wide manufactured home in Belfield on its owned triple lot, for nearly $50,000 in about 2014.  This trucking company completely furnished this manufactured home with everything from furniture, to appliances, beds, bed linens, cookware, and utensils.

This trucking company in Idaho, no longer does business in North Dakota, so they wanted to get rid of this manufactured home, just like it is, with all of the furnishings.  Six months ago, they were asking $25,000.  I went and looked at it, and it was fine with me.  The property taxes were only about $100 per year.  The mortgage payments, would be much less than I had been paying in rent for the past six years in Dickinson.

I went to or spoke to four or five Banks in Dickinson, and they each had their own excuse for not wanting to lend any money for this manufactured home, such as “We have been instructed to not lend money on any manufactured home whatsoever, no matter how new it is, or how much land is involved.” or “We can not lend money because the land is zoned commercial.”

I thought that this was ridiculous, I have very good credit, this was less money than a new vehicle costs, and the Bank could place a lien against my paid for home in Idaho if they ever needed to collect their money.  I was seriously considering putting this home purchase on my credit card, which has a credit limit of $35,000.

Many other people looked at this manufactured home in Belfield, and tried to buy it, but none of them could get a loan from a Bank.  A few days ago, the real estate agent sent me a text message, stating that the seller’s asking price is now down to $20,000.  This is a 20% price drop in six months.  I would have been happy to pay $25,000 with a home loan from a Bank.

I know one other person in Dickinson now, whose take home pay after taxes is at least $3,000 per month.  He is single, in his forties, and he has been employed with the same company for several years.  He recently applied for a home loan with a Bank in Dickinson, for a home owned by a relative of his who is willing to sell it to him for less than $200,000, even though the appraised value would be closer to $250,000.

This Bank informed him that they would approve him for a mortgage of up to $70,000.  Which means they don’t trust him to be able to make monthly payments of more than $400 per month.  If a single person’s take home pay after taxes is $3,000 per month, why wouldn’t this person be able to afford mortgage payments closer to $1,000 per month, and a mortgage of up to $180,000?

What I am explaining, is that Banks in Dickinson right now are being very restrictive on home loans, because for one thing, they expect home values to decrease.  The funny thing is, these Banks’ lending policies are the primary cause right now for why home values are decreasing.  They won’t loan money even when buyers are willing to pay the sellers’ asking prices.

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Growth In Florida, Texas, Arizona, And Exodus In Western North Dakota

I grew up in Florida, and lived there until I was 32.  My first memories of towns like my small hometown, Orlando, and Tampa, before I was eight years old, by the time I graduated from high school, all these towns had doubled in population.  By the time that I left Florida when I was 32, the populations of these towns had doubled again.

Florida was not a perfect place.  It was hot and often nearly 100% humidity.  The mosquitos were very bad.  Traffic became very bad.  People’s income was lower than income in northeastern states.  But people kept moving there.  It was possible for people of all education levels, skill sets, and background to find employment and housing.  The continual migration of people to Florida made the economy grow:  new schools, new hospitals, new roads, new housing developments, new shopping malls.  Development kept pushing out into the farm land and the swamps.

Everything that I just wrote above about Florida, happened in Texas and Arizona.  Life was not perfect in Texas and Arizona, it was hot, sometimes 118 degrees Fahrenheit during the day for weeks at a time.  There was a lot of dry desert.  But people kept moving to Texas and Arizona.  People of all education levels, skill sets, and background could find employment and housing.  The continual migration of people into Texas and Arizona made their economies grow: new schools, new hospitals, new businesses, new roads, new shopping malls, new housing developments.  The development just kept pushing out into the desert.

About 100,000 workers moved to North Dakota during this past oil boom. To Williston, Minot, Watford City, Killdeer, and Dickinson.  Life was not perfect in North Dakota, it got very cold, and there was not a lot of things to do.  But 80% to 90% of these workers didn’t plan on staying in North Dakota because the price of housing was just too high.  The price of housing increased by 400% within about three years of the beginning of the oil boom.  The workers could barely afford the cost of housing working at a high paying oil field job and working a lot of overtime.  How could they afford to stay in North Dakota with an oil field slow down?  They couldn’t.

You can drive around Dickinson and Watford City and look at the newly completed apartment communities.  Many of these new apartment communities are at 40% occupancy, even at recently greatly reduced rents.  Most of the oil field workers left North Dakota.

Florida, Texas, and Arizona could have killed their growth too if they would have raised housing prices 400%.  All of the retail merchants in western North Dakota: tire stores, hardware stores, lumber yards, clothing stores, grocery stores, furniture stores, appliance stores, car dealers, motorcycle dealers, and all of the service businesses: barbers, beauticians, mechanics, insurance agents, attorneys, chiropractors, printers, and all of the restaurants have the realtors, property managers, property investors, and property developers to blame for gouging the workers so bad that 80% to 90% of them left North Dakota, they couldn’t afford to stay here.

The enormous greed of the realtors, property managers, property investors, and property developers was like “Killing The Goose That Laid The Golden Eggs.”  The goose laid one golden egg per day, but the owner of the goose was so greedy, he cut the goose open to try to get all the gold right away, but this killed the goose, and there were no more golden eggs.

Answering A Reader’s Questions About Buying A Home Now In Dickinson, North Dakota

Do not buy a home now in Dickinson, North Dakota unless the price is very low, and it is a property that you will be able to rent out in the future.  I will thoroughly explain why I make this statement.  But I need to caution you right away that you do not want to let your employer or your coworkers find out that you are having any hesitation in wanting to buy a home in Dickinson.  Employers want to see that their employees are committed to being here, that they are dependent on their job here, and that they don’t plan on leaving.  Your coworkers will tell on you, believe me they will.  They all know that you are renting, and that you are looking at houses to buy.  The husband needs to blame the wife, that she is just so picky, the wife says, “The yard is too dark, the yard is too small, the bathroom is too small, the closets are too small, the kitchen is outdated, the bedrooms are too small.”  That way, everybody will just think that there is no pleasing his wife, everybody might even feel sorry for the husband, and have admiration for him in persevering with such a difficult wife.  The wife can blame the husband for not being able to find the right house, and everybody will just think the wife is crazy.  However, no one can find out that the truth is you are skeptical about buying a house in Dickinson right now.

Reasons not to buy a house in Dickinson, North Dakota right now:

  1. There is about a 50% chance that the oil field work in western North Dakota will continue to decrease, for years.  Not only will oil field related jobs continue to decrease, all jobs in all areas of the economy will subsequently decrease.  You can research this for yourself by reading about the history of North Dakota, and by talking to old local people that are not in business or real estate.  A good website to read is “A Brief History Of North Dakota Oil Production”, which is a collection of newspaper articles from the past about the Oil Boom in the 1950s, and the Oil Boom in the 1970s.  Supplement your reading by talking to old blue collar workers in Dickinson.  They will tell you about the difficulty in getting any employment for ten years after the 1970s Oil Boom, and that all employment was very low wage.  What I am telling you is there is a 50% chance that you or your husband may lose your job in a year or two, and that so will everybody else.  You will not want to live here, because there will be very few jobs, and they will be low paying jobs.  You will not be able to sell your house, because everyone else will be trying to sell their house too, and no one will have any money.  This all happened before in Dickinson, go read about it for yourself, and go ask old local blue collar workers.
  2. This is somewhat related to Reason #1, but I need to explain this separately.  I will begin by saying that the home prices are too high in Dickinson right now.  But let’s just say that you find a home that you like for $350,000 right now, and that this price seems fair.  Reading about the history of Dickinson, and talking to old local people, you find out what happened after the Oil Boom of the 1970s.  Based on what happened in the past, this house that you bought for $350,000 right now, two years from now if the oil field work has continued to decrease, you might not be able to sell this house for $180,000 because everyone else will be trying to sell their house too, no one will want to live here, and no one will have any money.  It is not that your house is worth so little money, it is that no one wants it, everybody wants to leave.  Do you want to lose that much money?  Are you prepared to leave the state and rent your house out?  Is your house the kind of property that you could rent out?
  3. There is a 50% chance that the price of oil will climb, will remain high, and oil drilling operations will begin again in North Dakota.  You can go and read for yourself news articles from all the different oil companies where they state, “In order for our company to begin again with drilling operations, the price of oil would have to climb to over $60 per barrel and remain there for several months before we would take any action.  Then, at that time we would begin bringing personnel back in all areas of operations.  It would take nine to twelve months to get enough personnel back to resume full operation.”  What this means to me, is that as long as the price of oil is low, employment in North Dakota will not increase. There will continue to be new apartment buildings with occupancy rates of 30%.  Apartment rents will continue to decrease, consequently house rents will continue to decrease.  There is no justification for home prices to remain high, other than wishful thinking of the homeowners and real estate agents.  Where are the owners of these houses that are for sale?  Are they still making high wages in the oil field, probably not.  How long can they afford to pay $2,000 to $3,000 per month mortgages, not forever, because if they could afford to wait, they would just wait for the Oil Boom to come back and make a profit.  They are not waiting because they can’t wait, they need to sell, more and more each day as they keep having to pay their mortgages, and new apartment rents become lower and lower.  A buyer right now can afford to wait for prices to drop in Dickinson.  A buyer should look at everything that is available, know what is available, and wait.  If the price of oil climbs for several months, and remains high for several months, and oil companies begin increasing their personnel, that might be the time to consider buying a house if you plan on staying in Dickinson and the oil field may be busy for more than a couple of years.  But you will have several months of advance warning before you have to decide whether to buy or not.
  4. Since you don’t have to hurry up and buy anything right now,  Keep Looking.  I would not only be looking for my ideal house, I would be looking for something that might be a really good deal.  This good deal could be a house closer to Belfield, South Heart, Richardton, or Gladstone, that may have so much land, have such a good view, or be so low priced that you feel it is too good to pass up.

To answer your question about real estate agents, property managers, and property investors gouging people.  Prior to 2007, there were three bedroom/two bathroom older homes in Dickinson that sold for $30,000 to $40,000 and rented for about $400 to $600 per month.  Retail workers, restaurant workers, construction workers, and retirees lived in these homes.  By 2011 these rents had increased to $3,000 per month, about five to six times what they had been.  The retail worker and restaurant worker wages increased by maybe 40%.  The construction worker wages increased by maybe 50% to 60%.  The retiree income might have increased by 5%.  But the rent increased by 500%.

All over Dickinson, the price of goods and services increased.  Grocery prices might have increased 15%, car repair prices might have increased 15% to %25.  Everybody could understand 15% to 25% price increases, but not the 500% housing price increase.  Everybody who moved to Dickinson to work was angry about the cost of housing and being ripped off.  Everybody who moved to Dickinson decided right away that as soon as the Oil Boom was over, they were leaving.  No one wanted to stay or could afford to stay after they lost their oil field job.  The real estate agents, property managers, and property investors might have been able to gouge people for about five years, but the people got gouged so bad that they all left, and now nobody wants to live here.  All the other business owners have the real estate agents, property managers, and property investors to thank for ruining what could have been permanent growth of the area.  All over the United States for the next fifty years, people will be talking about how bad North Dakota was, and really most of everybody’s bad experience was being gouged on housing.