Is The Oil Patch Hotel Bubble Collapsing?

Driving down Broadway in Minot yesterday I happened to catch these signs out in front of a hotel that, not so long ago, was renting rooms for over $100 per night:

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Hotel occupancy rates in the city have plunged of late, to the point where it’s clear that the city has a glut of hotel rooms available. Things may not have loosened up so much further west into the oil patch, but I’m wondering if Minot isn’t a leading indicator for the whole region.

A leading indicator not just of a collapse of the hotel market, but of the entire housing market. I’ve written before about the risk of a development bubble in the state, and I think hotel rooms are just the tip of the ice berg.

Maybe I’m wrong – I hope that I am – but the State of North Dakota has put a lot of money down to incent housing development, but between those subsidies obscuring the market and the speed with which economy has exploded in the western part of the state I worry that developers aren’t going to be able to find the edge of this market before sailing off it.

Property values in western North Dakota have soared with housing demand – I just got a letter this week from the City of Minot informing me of a $48,000 increase in the value of my home – but what happens to that value when the demand for housing plateaus, or even drops? How many of the people flooding into western North Dakota communities plan on putting down roots here?

Not as many as some think, I’d wager. I think the housing market in the state is quickly finding its equilibrium. The drop off in demand is going to come swiftly, I think, and as such we should be wary of any further housing incentives.

Rob Port is the editor of SayAnythingBlog.com, a columnist for the Forum News Service, and host of the Plain Talk Podcast which you can subscribe to by clicking here.

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