San Antonio Home Building Industry Navigates Around the Coronavirus
San Antonio, Texas has been growing at a steady rate over the past few years, and understandably so. Between 2016 and 2017, The Alamo City gained an average of 66 new people per day, making it on the list of America’s fastest-growing cities. With San Antonio’s population growth comes a booming real estate market. In August of 2019, the pace of home construction in the city reached a 12-year high as developers caught on to the rapid population growth and saw a solid investment opportunity. According to the analytics firm Metrostudy, builders started working on 3,498 homes in the second quarter – a 6.8% increase from the year prior.
The flourishing economy has gained attraction from residents all over the country, pushing a projected additional 1.1 million newcomers by the year 2040, as of the beginning of 2019. With the expected surplus of residents, construction costs began hiking up, along with land, labor, and municipal prices. This resulted in home prices rising, which had both pros and cons. Only 12% of the homes that were under construction in the late summer of 2019 would fall under $200,000 once complete. But local developers put in efforts to build more houses priced in the $200,000 to $250,000 range, often utilizing smaller lots to develop smaller, more affordable homes. As a Regional Director at Metrostudy, Jack Inselmann shares, “We were in a very good place heading into 2020.”
Projections were solid for The Alamo City, but has the pandemic altered those predictions?
In mid-April, at the height of the pandemic in the U.S., while the majority of businesses were forced to close, the construction industry was permitted to continue building. In a city with a rise in home building, there is no surprise that the pandemic stirred concern across both the home building and real estate industry. As Inselmann says in regard to the slowdown of the housing market, “Now we’ve been slapped in the face.”
As the unemployment rates soared, anticipated buyers were forced to step back from the homebuying process. Although, the city still saw potential homeowners browsing for homes online, while adapting to the virtual showing process and the evolving digital world of real estate. The region was still seeing houses being sold and closing as of April, but there was just no way to gauge how much of an impact the virus would have on the city in the long run. “We have a changing economy,” Jack Inselmann points out.
1,367 permits for single-family homes were issued January through March of this year, as opposed to last year when 1,274 permits were issued during the same period. But the chief economist at the Real Estate Center at Texas A&M University, Jim Gaines, shares that the effects that the pandemic has on the housing market don’t really show up until the second quarter. D.R. Horton, a large home building corporation, said that in its preliminary results for 2020, the pandemic started to affect business by the end of March. This was also clear when buyers canceled 2,020 orders in March, compared to the 1,368 cancelations during the same time in 2019. Despite these cancelations, the housing market remained strong due to high demand and low-interest rates.
Another large building company, Lennar Corp, was pushing through the peak of the COVID-19 outbreak by maneuvering around the social distancing rules. They did this by utilizing FaceTime with their buyers and even creating a drive-thru option for customers to sign important paperwork and close right from their car. The low-interest rates really played a huge part in their steady business, at least for now. Lennar, along with other building companies, took the slowing economy into consideration in the spring and adjusted projects so they weren’t putting so much money into land development. As executive chairman, Stuart Miller, expressed, “As the economy slows, we expect that our traffic will decline, and we will see the corresponding slowdown in sales.” Other small home building companies saw the slowdown a bit sooner, like Sitterle Homes. Yet people continued to buy homes, so construction never had to take a complete halt.
Fast forward to this summer and San Antonio is getting right back on track. While the city is still seeing effects from the COVID-19 pandemic, San Antonio is thriving compared to other large metros across the United States. According to SABOR (San Antonio Board of Realtors) newly released May Housing Market Report, the number of homes sold dropped 20%, yet home prices have continued to rise. Even with that 20% dip, Bexar County was still doing better off than Texas’ other metro areas. Comparably, Travis County’s home sales dropped 33%, Dallas County dropped 32.9%, and Harris County dropped 24.9%. The average home price was $281,353 in May of this year, and the average home prices overall are up 5% since 2019. With all things considered, that’s a substantial increase. As SABOR’s 2020 chairman, Kim Bragman, said, “While we saw a little downward trend this month compared to May 2019, if we’re looking at total numbers for the year, the sales numbers are only at 0.3 percent decrease, so we’re near par for year-to-date home sales. Also, we are entering into June with total number of pending sales up by 20 percent, which is promising for an upward trajectory to round out the year, as we move into summer buying months.”
Of course, only time will tell how the housing market will progress through this summer as the country continues to battle the pandemic while gradually re-opening, but The Alamo City is certainly driven. Heading into June, the city already had 3,745 pending sales, which is a great signal of what the upcoming months will bring. With the steady pace of home construction, consistently low-interest rates, and the expanding population, San Antonio won’t let the pandemic shatter their housing market.
As builders continue to focus on more affordable housing options in the $200,000 range, potential buyers are thrilled that modest options are in abundant supply. The Alamo City also welcomes new homeowners with not just a secure housing market, but top-notch Tex-Mex food, the iconic River Walk, and a progressive community that will likely be home to many new homeowners in the weeks and months ahead.