North Dakota

The recent GF Herald article about housing prices brings to the forefront an issue with housing price calculations. The Herald used index numbers based on sales, which is problematic. What was the composition of sales in a given month? If there were only high value homes there could be sample issues. Also, when you attempt to make a comparison between two areas you have a double issue with the inconsistency of samples.

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As a topic, the economics of housing in North Dakota creates a significant amount of debate. This debate lacks consistency, ground rules, and facts. Most of the discussion takes place under the umbrella term of “affordable housing.” On numerous occasions I indicated the inadequacy of this term. The first problem is that it seems assumed the mere assertion of an “affordable housing” problem is adequate substitute for actual evidence of a problem. The second is a failure to recognize the differing nature of a potential problem when we are talking about a retired couple, a newly married young couple, or a family of five. An “affordable housing” problem for each of these three groups could look significantly different and require drastically different solutions. How much of a solution do we want? There are times it seems people want a 100% solution, by which I mean everyone that wants a house should have one in their price range. It is not that kind of world! Let’s make sure it is on the block they want too.

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I have not looked at oil production time series for North Dakota in a while so I thought it time to take a look. Oil production, in fact most commodity production, and certainly extractive production, has an interesting cost structure. There are significant fixed cost elements to cover in order to generate profit. Notice in the graph below that while price starts rising around 2000, it was not until around 2005 that production started to rise. As the price continues to rise we see production continue to increase too.

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