Bailey Hallberg enjoys going on home tours — they give her an opportunity to compare different styles of architecture and interior design.
It’s a good thing she does, because she had to look at more than 30 homes over the course of three months, and make three offers, before she managed to buy one in March.
Hallberg, a recent graduate of the University of Texas at Austin who works in marketing at USAA, put in her first bid for a home near Phil Hardberger Park the day after it hit the market, offering $8,000 more than its listing price. She made it to the final round of bidding, but lost out. For the second home, she offered a few thousand below the listing price because it needed repairs. Again, no luck.
She succeeded on her third try, when she offered the listing price for a four-bedroom home a mile inside of Loop 1604 on the Northwest Side. Its backyard is big enough for her German Shepherd, Cojo, to play in, as well as another German Shepherd puppy she hopes to get soon.
“I think the fun and the stress balanced for me,” Hallberg said of her home search. “I felt like I had to be on my phone all the time, checking for new listings, seeing what was coming up, just being on top of things or else something would slip through and I would feel regretful that I missed it.”
As San Antonio’s housing market enters its busy summer season, Hallberg and other buyers are contending with soaring prices and a record-low supply of homes for sale. For those looking for a home in an affordable price range, generally below $200,000, the local market is more hostile than it has been at any other time in recent history, and it shows no sign of letting up.
San Antonio, like many cities in the U.S., is suffering from a shortage of homes on the market. Population and job growth have increased demand for homes, but homebuilders haven’t been able to keep up, economists say. That has caused prices to spiral upwards.
“Supply is not catching up with demand because of the lack of new home construction by historical standards, and certainly lagging behind job creation,” said Lawrence Yun, chief economist of the National Association of Realtors. “This is critical.”
The local area’s inventory of available homes — a closely-watched statistic that measures the average time it takes for a home to be sold if no new homes are listed — hit a record low of 3.1 months in December and has hovered slightly above that since then, landing at 3.3 months in March. An inventory of six months indicates a market that is balanced between buyers and sellers.
In layman’s terms, that means homes are flying off the shelves.
Scott Posey, a computer network manager, didn’t expect the market to be so hectic when he started looking for a home at the beginning of March as he moved to San Antonio from Washington state for work.
“At first it felt pretty calm. It felt like I could take my time and take a look,” he said. Then “I realized you can’t be choosy — if you find a house you have to move on it, very quickly.”
Posey looked at about 60 homes. He wanted to find one costing between $170,000 and $230,000, and he ended up buying one at the top of the price range: a $225,000 home near Seaworld San Antonio on the far West Side.
Lorena Peña, the chairwoman of the board for the San Antonio Board of Realtors, expects the supply to get tighter as the market heats up in the summertime.
Buyers can cope with the tight market by getting pre-approved for loans before beginning their search and by meeting with their real estate agents to make sure they have a good understanding of what they are looking for, Peña said. She also recommended sending written letters to sellers as a way to stand out from the crowd of buyers.
Many of today’s homebuyers might be surprised to hear that in 2007, at the height of the last decade’s housing bubble, the median price of a home in the San Antonio metro area was $151,000, according to data from the San Antonio Board of Realtors. The median has gone up more than 45 percent since then, landing at $219,600 in March.
Over the last decade, the market has largely lost its ability to build new homes priced under $200,000, a level that is affordable to many of San Antonio’s middle-class residents, said Jack Inselmann, an economist with Metrostudy who analyzes the local market.
“We’ve always had the ability to build very affordable housing, as much as we wanted,” Inselmann said. “This cycle, we are not able to do that, and we’re not able to do it because of the cost side of the equation.”
Five years ago, half of the new homes sold in the local market were priced under $200,000, but today only 15 percent are in that highly-coveted price range, he said. In the meantime, there is no shortage of homes priced above $200,000, and builders are actually constructing slightly more homes than are needed over $300,000, Inselmann said.
That matches with the experience of Kimberly Friend and her husband, who had no trouble finding their $475,000 home off Bitters Road on the North Side when they moved to San Antonio from Houston earlier this year. The home had been on the market for three or four months, and they paid about $20,000 below asking price.
“We are beyond happy,” Friend said of their home, with a covered veranda and a backyard full of oak trees.
The market’s inability to fulfill demand in the below-$200,000 price range has created a shortage of about 10,000 homes in the local area, Inselmann estimates. That shortage has likely cost the local economy more than $1 billion in lost property taxes and other money pumped into the economy, he said.
In the meantime, apartment rents are rising as well. The median rent in the San Antonio metro area rose 12 percent between the end of 2014 and the first quarter of this year, from $1.01 a month per square foot to $1.13, according to Austin Investor Interests, a company that analyzes the local market.
San Antonio is still relatively affordable compared to many other major cities — in the Austin-Round Rock metro area, for example, the median price of a home was $300,000 in March, and the inventory of homes on the market was 2.2 months, according to data from the Texas A&M Real Estate Center. The median for Dallas-Fort Worth was $269,000 last month, while for Houston-The Woodlands it was $225,000.
But those cities have higher median incomes than San Antonio, which makes them better able to withstand higher prices, Inselmann said.
“We’re still very affordable compared to the rest of the country… Shoot, $200,000 to $300,000 is affordable to many of the major areas outside of Texas,” Inselmann said. “What we don’t have is the extremely affordable product that we used to have.”
Lack of construction workers
Many trends have contributed to San Antonio’s tight housing market, but one of the main factors is a lack of construction workers — including plumbers, electricians and truck drivers — which has made it more difficult and costly to build new housing subdivisions, developers and analysts say.
Earlier this month, a Florida developer told the Express-News that rising construction costs was one of the reasons he canceled plans to build a boutique hotel on the River Walk.
The construction industry has found it difficult to recruit workers due to the low unemployment rate, stricter immigration policy and too little emphasis on trade skills in the U.S. education system, said Lawrence Yun, chief economist for the National Association of Realtors.
Another problem is that many family-owned homebuilders floundered during the Great Recession and have had trouble getting back into the market since then, Yun said. Community banks that were formerly the source of many construction loans are hampered by new financial regulations, he said.
Rising home prices could hurt Texas’ celebrated ability to attract workers from other states, Yun said.
“If housing costs become more expensive, then you may see the flow of new residents coming into Texas slow down, and that will hurt job growth,” he said.
Land costs are also on the rise in San Antonio because developers are running out of places to build in areas with desirable school districts, Inselmann said. The fees that developers must pay to municipalities in order to build homes — including payments for roads, sewers and the impact on nearby trees — have soared in recent years, he said.
Rising interest rates are also adding to the cost of buying a new home. While rates remain extremely low by historical standards, they have been on an upswing since last fall. After hitting a low of 3.78 percent in September, the interest rate for a fixed-rate 30-year mortgage rose to 4.58 percent on Thursday — its highest level in nearly five years, according to Freddie Mac.
The interest rate climb could make the national housing market even tighter, because many would-be sellers might decide not to list their home out of concern they would lose their low mortgage rate, Yun said. He doesn’t think rates will reverse anytime soon. Inflation, and the Federal Reserve’s ongoing campaign to raise interest rates, will probably push mortgage rates up further, he said.
To alleviate the housing shortage, Yun hopes that governments will encourage more construction, including by training workers and reducing the regulatory burden on construction.
Inselmann thinks the current trends will continue, with home construction growing at a slower pace than in the past and prices continuing to rise— at least until the end of the current market cycle.
“Our growth has been more methodical, and it will continue to be that way,” Inselmann said. “We’ll grow at a slower pace because of it, and it’ll keep prices up.”
Richard Webner is a San Antonio Express-News staff writer. Read more of his stories here. | firstname.lastname@example.org | @RWebner