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What’s behind Fargo-Moorhead’s boom?

Land values in Fargo-Moorhead rose 74 percent from 2012 to 2017, from $138,000 per acre to $241,000 per acre.

Downtown Fargo
While most of the country was mired in recession, the Fargo-Moorhead area saw only a brief slowdown before an economic expansion.

What comes to mind when you think of the Fargo area?

Snow-swept tundra? Exaggerated accents? Woodchippers?

What about the fastest-escalating residential land prices in the Upper Midwest?

Land values in Fargo-Moorhead rose 74 percent from 2012 to 2017, from $138,000 per acre to $241,000 per acre, outpacing rates of increase in the Twin Cities (42 percent) and other Midwestern cities — as well as Santa Barbara, California (67 percent); Austin, Texas (68 percent); and Denver, Colorado (62 percent), according to a new report from the Harvard Joint Center for Housing Studies.

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The spike in land value is just one sign of an economic boom that’s happening in Fargo, bringing new jobs, new residents and new homes to the Red River Valley.

More jobs

With North Dakota State University, Minnesota State Moorhead and Concordia College rooted on campuses on either side of the Red River, higher education has long been an underpinning of the local economy in the Fargo-Moorhead area. Unbeknownst to many outsiders, Fargo is also home to one of Microsoft’s biggest corporate campuses outside suburban Seattle, with more than a thousand jobs. So, too, has it been a hub for agriculture, in the middle of one of the country’s most fertile ag regions.

More recently, it’s seen growth outside its traditional industries. While most of the country was mired in recession, the Fargo-Moorhead area saw only a brief slowdown before an economic expansion, a phenomenon tied to strong ag prices and the oil boom going on at the time in western North Dakota. Its annual unemployment rate hit 4 percent in 2009 — less than half the unemployment rate seen nationally at the time.

The region saw its per-capita gross domestic product, a measure of the size of its economy relative to its population bounce back quickly after a brief decline, while other Minnesota metros underwent more protracted economic recoveries.

Gross domestic product per capita by Minnesota metro
Note: Figures shown in 2009 dollars.
Source: Bureau of Economic Analysis, compiled by Minnesota Compass

Already somewhat of a health care hub for surrounding rural areas, owing to its status as the biggest metro area on the north-central plains, Fargo solidified that role in 2017, when Sanford Health built an 11-story hospital, which includes a top-level trauma center, and employs an estimated 1,500 at peak times during the day.

Fargo Mayor Dr. Tim Mahoney, who is a surgeon, said people used to be transported to the University of Minnesota or the Mayo Clinic for complex care.

“There’s very few things I would have to send out of this community now,” he said.

With the growth of the region’s medical, technology and manufacturing sectors, the economy has become more diverse.

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“We used to be extremely dependent on agriculture. The car lots were full of cars — nobody buying — when ag was doing poor. You don’t see that as much,” Mahoney said.

The economic expansion includes the area’s amenities, too.  A satellite NDSU campus and new high-rise apartments have cropped up in downtown Fargo. There’s taprooms to be found in town in both Fargo and Moorhead.

More people

Along with jobs and amenities have come people. Derrick LaPoint, who grew up in Eau Claire, first moved to North Dakota more than a decade ago to go to school at the University of North Dakota, where he played hockey.

After graduation, he moved to the East Coast to play hockey, but was injured, leaving him looking for a new career. After he finished a master’s degree, he and his wife found jobs in Fargo and decided to stay: between the cost of living, the jobs and the amenities, the city had a lot to offer.

LaPoint worked for the city of Fargo for several years before becoming the president and CEO of Downtown Moorhead, Inc., an organization aimed at revitalizing downtown Moorhead.

He and his wife aren’t alone. The Fargo-Moorhead metro has grown by more than a third in the last two decades, from 175,000 people in 2000 to 245,000 people in 2018.

Fargo-Moorhead metro population
Source: St. Louis Federal Reserve

Some of that comes from older people moving into town to be closer to health care, some comes from young families moving for jobs and affordable housing, and some comes from young adults, whom the area has been more successful at retaining in recent years. According to a recent study, the Fargo-Moorhead area keeps about 80 percent of NDSU graduates around, Mahoney said.

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“What used to happen in our area, everyone would go to the big city — Minneapolis — and then come back. Now we’re seeing more people stay,” he said.

In the Fargo-Moorhead area, they can live in downtown Fargo, within walking distance of bars and entertainment, and pay significantly less in rent for an equivalent apartment in many bigger cities.

Mahoney described Fargo as having a small-town feel with big-town benefits.

“Right now in Fargo, there’s some type of feeling that kids pick up on — it’s got a buzz, it’s got stuff to do, interesting entertainment and restaurants,” Mahoney said.

More affordable housing

It’s not just the downtowns that are booming.

Houses have gone up on newly developed land outside of Fargo and Moorhead, and with the push to develop has come higher land prices, said Vicky Matson, the president of the Fargo-Moorhead Area Association of Realtors.

Some worry the spike in construction will make the region less affordable for low-income residents. According to the West Fargo Pioneer, of 800 apartment units built or permitted in the last five years, just one building with 42 units is advertised as affordable.

The Harvard report found a 13 percent decrease in the number of rental units available for under $800 per month between 2012 and 2017.

And though the number of low-income renters dropped by a third in that timeframe, housing price growth is outpacing income growth in the area, said Dan McCue, senior research associate at Harvard’s Joint Center for Housing Studies.

“Incomes are up pretty moderately well, but house prices are up almost twice as much as incomes, so prices are really outpacing the strong income growth,” he said.

Still, relatively speaking, housing remains more affordable than in other cities.

New-construction four-bedroom homes can be found for $260,000 and under in Fargo-Moorhead. It’s tough to find old houses for that much in many Twin Cities neighborhoods.

Residents say Fargo-Moorhead isn’t for everyone. The average annual temperature barely breaks 40 degrees and a normal winter can mean four feet of snow.

But population growth shows an increasing number of people are being drawn to the area.

“It’s just a great little gem,” Matson said.