As members of the real estate community gathered last week to discuss the year that was and what 2018 might bring, all agreed that the future of the housing market is strong for San Antonio and Texas.
Two forecasting events were held last week offering 2018 outlooks from differing but complementary perspectives of the local housing industry: one on Jan. 4 focused on the home sales market presented by the San Antonio Board of Realtors and one on Jan. 5 focused on the home construction market held by the Greater San Antonio Builders Association. Both events featured housing experts, economists, analysts and politicians discussing what challenges and successes San Antonio’s housing market had in 2017 and what 2018 holds in store.
Two overarching themes were prevalent at both events: The overall housing market will likely continue its upward trajectory, and more single-family homes need to be built in San Antonio in order to control rising home prices.
2017 was a good year
Each event showcased plenty of data showing a very positive picture of the overall economy and how the local and national housing markets faired in 2017. At SABOR’s event, Lawrence Yun, chief economist and senior vice president of research at the National Association of Realtors, said that 2017 saw a decade high for home sales nationally and a 4 percent increase year-over-year in home sales in San Antonio since November 2016. Median home prices in San Antonio also saw a 9 percent increase over the same period.
National home sales declined at the beginning of 2017 as a result of a bump in mortgage rates. But as rates eventually tapered off, almost every month of 2017 saw a rise in home sales compared to the same month in 2016. Meanwhile, a survey by the NAR revealed that people were more willing to buy homes during 2017 than in 2016.
"Politically, people may still be feeling pretty divided, but from an economic standpoint, people are feeling more optimistic overall,” Yun said.
The new affordable
While there was plenty of encouraging data in 2017, speakers at both events expressed concerns, most of which related to San Antonio’s housing inventory and how an undersupply is negatively affecting home prices. San Antonio housing starts were at a decade high in 2017, but experts say there need to be more.
“I’m really concerned about a housing shortage, and we can do something about it this year, but we can only do something if you care,” economist Mark Dotzour said.
While starts of single-family homes continue to rise, the housing inventory on the market — expressed as the approximate number of months worth of homes available at a given time — has remained much lower than the recommended six months that most consider healthy for any housing market. San Antonio averaged closer to four months of inventory in 2017. Dotzour and others cite the less-than-optimal inventory as the reason prices have increased. That price increase is eliminating a number of new affordable homes from the market and even creating a new definition of affordability.
Jack Inselmann, senior regional director at Metrostudy, said new homes under $200,000 are simply not being built in San Antonio, as the percentage of new homes at that price has declined steadily. A 2009 report showed that new home starts priced under $200,000 accounted for 65 percent of the San Antonio market, while 2012 saw 50 percent of new home starts priced below $200,000. In 2017, just 17 percent of all new home starts in San Antonio were for homes under $200,000.
Three price ranges have seen significant growth since 2013, including $200,000 to $250,000, $250,000 to $300,000 and $300,000 to $400,000. In 2017, the $200,000-to-$250,000 range accounted for the most new housing starts at 28 percent. The median home price in November 2017 was $216,900, while the average home price was $256,253, according to SABOR.
"$200,000 to $250,000 is the new affordable," Inselmann said.
On top of rising home prices, housing has become less affordable to many because income growth has not kept up with rising prices. Since 2011, Yun said, home prices have risen by 48 percent, while incomes have risen by 15 percent over the same period. Despite this problem with affordability, San Antonio still ranked 14th nationally in new home starts in 2017, led by development on the city’s West Side. Since 1980, West Side San Antonio has led the metro area every year in new housing starts, coming in at above 30 percent each year. In 2017, the West Side accounted for 32.2 percent of new housing starts, the greater New Braunfels area ranked second with 17.2 percent of all new starts, and the area around North Loop 1604 East and Interstate 35 ranked third with 16.3 percent of the metro area’s new home starts.
Inselmann said these numbers are not likely to change anytime soon, as San Antonio’s expansion west and further development along the I-35 corridor continues.
What to expect in 2018
Once again, the experts seem to agree: 2018, like the year previous, will be another year of growth for San Antonio, the state and the country, as long as nothing major disrupts the economy.
For Yun, the national economic and housing forecasts look to stay positive and improve on 2017. He predicts a national growth in gross domestic product of 3 percent and the creation of an additional 2.4 million jobs, as well as 700,000 new homes sold and a median price growth of 2 percent.
Locally, Inselmann predicts that job growth in San Antonio in 2018 will again outpace that of the previous year, saying anything from 11,500 to 12,000 new jobs in the area would not surprise him.
“What we’ll experience next year is another good year,” he said.