Housing shortages in U.S. energy boom towns have driven rents up to New York City levels; but don’t expect that to last too long, says Moody’s Investor’s Service.

Rents in the town of Williston, North Dakota, for example, have become among the most expensive in the U.S., according to Moody’s.  Rent for a one to two bedroom apartments have nearly tripled to $2400 per month in 2012 from $900 per month in 2008.

The town is in the Bakken formation and is where many of the major energy companies have based their regional operations.  Cheaper extraction techniques combined with high oil prices led to the latest boom in the region, which began in 2007.

In light of the booming economy and severe housing shortage, apartment construction in oil rich areas like Williston and in Williams County has soared.

Not all of the boom towns with a lack of housing are in North Dakota; housing prices have also shot up the West Texas area of Midland and Odessa. Related Companies, on Wednesday said in a press release that it has acquired a portfolio of 21 multi-family apartment properties, including approximately 3,000 apartment units in Midland and Odessa.

The company said that it planned to “continue to pursue multi-family rental properties in markets nationally that will benefit from job creation resulting from the recent surge of energy exploration and production.”  The company is in advanced talks for a deal on an existing project in North Dakota's Bakken region, according to a report in The Wall Street Journal.

In its report, Moody’s warned that rents, at their current levels are “unsustainable.” They are likely to peak around 2020 and then decline following trends in energy-related employment in these areas. In western North Dakota, for example, the ratings agency said it expects employment to peak around 2020 and then decline. According to Moody’s, rents will ultimately normalize at “far lower levels”.

The decline in rents is likely to adversely affect newly originated loans, typically with 10-year terms maturing in 2024, said Moody’s in the report.

However Moody’s said that loans backed by apartments in oil boom regions typically have “faster than normal amortization schedules and no interest-only period.” “Rapid amortization effectively channels a portion of the non-sustainable rent into paying down a loan, but risk remains given that the barriers to construction in this sparsely populated region are few and that employment is substantially tied to one traditionally volatile industry,” explained analysts in the report.

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