RealEstate

Home prices soar in San Antonio

By Richard Webner | June 9, 2017 | Updated: June 12, 2017 9:23am

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Photo: Federica Valabrega /Federica Valabrega For The San Antonio Express-News

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Jennifer Sanchez spent two years looking at more than 45 homes before she managed to snatch one up in her price range of $150,000.

Finding a home in San Antonio for under $150,000 was one of the most grueling experiences of Jennifer Sanchezs life.

Desperate to escape her crowded apartment complex, she looked at more than 45 homes over a span of about two years. Many of
the ones in her price range initially $110,000, but later $150,000 when she improved her credit were in rough
neighborhoods or had damaged foundations, moldy walls or chaotic oorplans, she said. The homes in decent condition often
were snatched up within a day.

Sanchez kept herself going by focusing on her dream: a house where you get to come home and relax, and not have to worry
about what the upstairs neighbor is doing.

In October, she nally found it, a three-bedroom ranch house on the Northeast Side. She paid $153,000, making her offer the day
after it hit the market. Shes in love with it for the rst time, her two boys have their own bedrooms.

Even after such a long search, Sanchez said shes lucky to have found a home in her price range, and the data show shes right.
Her two-year quest coincides with the toughest time in decades for local house hunting.
San Antonios housing market is the tightest its been since at least 1990, giving sellers massive leverage over buyers, according to
data tracked by the Real Estate Center at Texas A&M University.

Home prices have soared in San Antonio over the past ve years as the citys growing population has created more demand for
housing. The median home price was $215,500 in April, a 36 percent increase from that month in 2012, according to data from the
San Antonio Board of Realtors.

Housing price changes 2011-16 ExpressNews.com

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Rising home prices threaten San Antonios reputation for cheap housing, which has lured new residents and companies for
decades, experts said. Jack Inselmann, a senior regional director with Metrostudy who studies the local market, noted that low-
priced homes are crucial to San Antonios large working-class and military populations.

If you compare around the state, we dont have the same salary scale you have
in Houston or Austin or Dallas-Fort Worth, he said. Weve always been able
to provide that very affordable product, and now we cant.

New homes priced under $150,000 used to be common in San Antonio, but now theyre nearly impossible to nd, Inselmann said.
Homes for less than $200,000 are on the endangered species list, he said. A few years ago, half of new homes cost less than
$200,000, but now its about 20 percent, he said.

Inselmann calculates that rising prices have created a housing shortage between 5,000 and 6,000 homes dont exist in the price
range that local buyers need, he said.

Developers say they cant make new homes fast enough or cheap enough to satisfy demand. They blame a shortage of plumbers,
electricians, truck drivers and other workers, as well as new regulations that they say have made each home more expensive to
build.

Its just Economics 101. Weve got strong demand being created by population and employment growth in the community, said
Jim Gaines, chief economist at the Texas A&M Real Estate Center. The other side of the equation is, the supply has not been able
to keep pace with that demand.

The housing crunch

Rents are climbing, too, as millennials and empty-nesters ock to apartment complexes and developers concentrate on building
upscale units, experts said. The median rent for a two-bedroom apartment in San Antonio rose to $1,055 a month in March from
$805 a month during that month in 2011, a 31 percent increase, according to data from Zillow, a website that offers listings for
homes and apartments.

Were still cheaper than most other cities, said Dan Markson, senior vice president of development at apartment builder NRP
Group. But every time you add 10 dollars (to the rent), you price somebody out. I can tell you how sensitive it is.

Local wages havent kept up with the rising costs of homes and apartments. The San Antonio metro areas median household
income rose by only 3.7 percent between 2012 and 2015 the last year for which data is available to $53,122, U.S. Census
Bureau data show. The areas median home price surged by 21.8 percent and its median rent for a two-bedroom by 23.7 percent
during those years, according to data from SABOR and Zillow.

San Antonio is far from alone. Demand for housing is outpacing supply in large swaths of the U.S., causing prices to surge,
especially in booming cities such as San Francisco and Seattle.

The Alamo City remains relatively affordable compared with other large cities. In the Austin metro area, the median home price
was $291,750 in March, according to Texas A&M. The median was $227,500 in the Houston area and $250,000 in Dallas-Fort
Worth. Prices rose faster in each of those cities than in San Antonio between 2011 and 2016.
Nonetheless, rising housing costs are straining the budgets of low-income residents of San Antonio, who are having more trouble
nding clean apartments in good parts of the city, said David Nisivoccia, president and CEO of the San Antonio Housing
Authority. With rents rising, landlords who once accepted tenants through the Section 8 voucher program, a federal rental subsidy
program, are deciding to put the units on the open market, he said.

Tight supply, rising costs

One of the things that makes San Antonio more attractive to new residents is its relatively low housing prices. But the citys
growing population is pushing up demand for housing, making homes and apartments more expensive.

Bexar County gained more than 200,000 residents between 2010 and 2016 to reach a population of 1.9 million, according to the
Census Bureau, and its expected to add another 1.1 million residents by 2040.

Pent-up demand from the recession is also causing prices to rise, experts said. Aspiring homeowners who decided not to buy
during the lean economic years of the late 2000s and early 2010s are reconsidering now.

Local homebuilders said they cant satisfy this surge in demand, partly because theyre suffering from a shortage of construction
workers. When the Texas oil industry boomed ve years ago, it drew workers away from construction; after it went bust, many of
the workers didnt come back, said Wayne Moravits, owner of Monticello Homes and president of the Greater San Antonio
Builders Association. At the same time, not enough young people are entering the industry.

Nationally not just here on the local level theres not a very strong conduit to get people from high school into the trade-
based work force, Moravits said.

Now the supply of homes on the local market is as tight as it has ever been in recent memory, putting buyers at a disadvantage and
sellers in the drivers seat. The inventory of available homes which measures the time it would take for all homes on the market
to be sold if sales continue at the current level hit a historic low of 3 months between December and February, according to the
Texas A&M Real Estate Center. It has loosened up slightly since then, reaching 3.4 months in April, but thats still very low.
An inventory of 6 months is considered to be balanced between buyers and sellers a level that the local market hasnt reached
since fall 2012.

I looked for so long, Sanchez said, recalling her two-year search for a home. This is where I want to make my memories, and
live with my family for the rest of my life.

Another problem is rising land costs, builders said. Less land is available in areas that are in high demand for their sought-after
school districts and low crime rates especially the North Side, where Camp Bullis and regulations protecting the Edwards
Aquifer limit growth.

Homebuilders also complain that local and national regulations have become more costly. Over the last two years, San Antonio
Water System has more than doubled its water supply fee, from $1,200 to $2,700, which gets passed along to homebuyers, said
Michael Moore, owner of Ironstone Development. Twenty-four percent of the cost of the average new home comes from
regulatory costs, he said, citing statistics from the National Association of Home Builders.

For apartments, one of the main causes of rising rents is a recent trend of building upscale complexes rather than affordable ones,
said Ernest Brown, an investment broker with Rohde, Ottmers & Siegel Realty Services. Developers are responding to consumer
demand for luxuries such as concierges, dog parks, tness centers and resort-style swimming pools, he said.

Many developers are buying low-income or mid-scale apartment complexes and xing them up so that they can charge higher
rents. Presidium, an investment rm with ofces in Austin and Dallas, has done that with at least six complexes in San Antonio,
many of them in the Medical Center area. As a result, fewer cheap apartments are on the market.

What youre seeing is not so much rent growth, but a dwindling supply of no-frills apartment complexes, Brown said. You are
losing some of your low-income and workforce housing options.

Hottest areas
Home prices are rising fastest in inner-city neighborhoods on the near West, East and South Sides, according to SABORs data.
Those areas struggle with poverty and crime, but new residents have swarmed there over the past few years to restore historic
homes and experience the urban lifestyle.

The local ZIP code with the steepest rise in home prices is 78202, which includes the hip Dignowity Hill neighborhood just east of
downtown. The median price of a home there surged more than 250 percent between 2011 and 2016, from $28,000 to $100,000.

An inux of white millennials has caused prices to soar in Dignowity, which remains largely Hispanic and black, said Donalda
Smith, former president of the Dignowity Hill Neighborhood Association. Developers and home-ippers have ocked to the
neighborhood, cramming several homes into lots that formerly held only one, she said.

Its nice to see the neighborhood rejuvenated, but rising property taxes are a common complaint among residents, Smith said. She
thinks the rising costs have fueled a recent trend of residents renting their homes on short-term rental websites like Airbnb for
extra income.

Home prices have also grown especially fast in Government Hill, east of The Pearl, and large parts of the West Side and the South
Side, SABORs data show. They grew more slowly around wealthier neighborhoods like The Dominion, which had a 14 percent
increase between 2011 and 2016. Home prices in the Stone Oak area rose by roughly 21 percent increase while those around
Alamo Heights increased by 26 percent during the same time period.

Apartment rents have risen fastest in the area north of downtown and south of Loop 410, between Interstate 10 and U.S. 281 an
area where numerous upscale complexes have been built around The Pearl and the Alamo Quarry Market according to Austin
Investor Interests, a rm that researches the local multifamily housing market. Rents in that area increased by 19.8 percent
between the fourth quarters of 2014 and 2016, to $1.09 a square foot. Rents have also risen more than 10 percent in the near East,
West and South sides.

The construction of upscale apartment complexes is showing signs of slowing down in other major cities, but developers continue
to build them in San Antonio last month, the Cellars complex opened at The Pearl with the most expensive apartment in the
city, a penthouse with a price tag of $13,975 a month.

Brown, an investment broker, thinks the local market could soon pivot toward no-frills complexes catering toward frugal young
renters.

They want a less expensive place to live, and they dont need a workout facility there they go to L.A. Fitness. They dont need
to have a swimming pool, because theyre gone on the weekends, he said. I think youre going to see some select developers say
You know what? Theres a demand for a less amenity-rich product thats less expensive.

When it comes to single-family homes, San Antonios market has cooled a bit in the last few months. The supply of homes on the
market has loosened some although it remains extremely tight by historical standards. Home sales actually declined slightly in
April. But prices continue to climb the median home price jumped 8.4 percent in April, hitting a record high of $215,500.

Gaines, the Texas A&M economist, expects the growth in home prices to slow down. In a year or so, annual growth will subside
to about 3 percent or 4 percent, he said. Many homebuilders hope President Donald Trumps administration will relieve some of
the industrys regulations, he said, which could allow them to speed up construction.

Inselmann disagrees, saying prices will continue rising at a strong clip.

Well have to see how things transition during the next downturn, whenever that is. Usually when that happens, prices will
stabilize, or maybe climb a little bit, Inselmann said. Right now, they continue to go up.

If the housing market cools down, it could make life easier for aspiring homeowners such as Sharon Martinez, who lives with her
boyfriend but wants a place of her own.

She spent three months searching for a home under $200,000 on the Northwest Side, but the good homes went fast and the rest
had issues. They were in a rough neighborhood or a ood zone, they had bad foundations or crumbling cement, she said. Some of
them were xed up to look nice on the outside, but the interior was in bad shape. One of them looked like an ax murderer lived
there, she said.

Martinez made offers for a handful of properties, with no luck. In one case, she liked a home so much that she sent a handwritten
letter and a portrait of herself to its owner because she thought it would gain her some goodwill. Nothing came of it.

Two weeks ago, Martinez nally found one she liked, a three-bedroom, two-bathroom home in Leon Springs with big trees in the
front yard and a patio in the back. She went under contract for it and hopes to complete the sale next month.

It was very exhausting. You have to have lots of patience, and just perseverance, I guess, she said. Its a crazy roller coaster
ride hang on tight, follow the rules and regulations, and hopefully youll come to a good stop and nd something good.

rwebner@express-news.net

@rwebner

Richard Webner
Business reporter

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