Eager buyers and low interest rates are helping to fuel a rise in new home construction in the San Antonio area.
Builders began work on 4,458 homes in the third quarter, a 26 percent increase from the same period last year and the most starts in a quarter since 2007, according to a report by Zonda, formerly known as Metrostudy.
Housing starts rose 14.1 percent year-over-year to 15,033, also the highest level since 2007. Sales are booming, with closings on new homes increasing 26 percent in the third quarter and 18 percent over last year.
The pace is expected to continue. Despite the coronavirus pandemic, builders are on track to start work on 16,000 homes in 2020, the number Zonda regional director Jack Inselmann forecast in January.
“We’re going to finish out the year with good numbers,” said Inselmann, who has been studying the local market for decades. “(The numbers) may not be as high as they were back in ’06, but it’s a much better, healthier market. It’s the best market I’ve ever seen in San Antonio.”
Job growth is usually cited as a factor driving increases in building, but the pandemic has thrust many employees out of work. There is “a little bit of carry-over” from last year’s economic conditions, Inselmann said.
Low interest rates are also contributing to the surge and pushing prospective buyers off the fence. That highlights a disparity in the pandemic: employees who held onto their jobs may be able to save money and seize on the rates, while others who have been laid off or had their hours cut are struggling to get by.
Builders were waiting on lots to be ready as well, pushing many housing starts into the third and fourth quarter this year, Inselmann said.
Workplace shifts are another possible contributor. With more employees working from home, some may be looking to move from an apartment to a house or spread out with more space.
Inventory also remains tight, with prospective sellers wary of putting their houses on the market amid a pandemic and available homes quickly being snapped up.
Sales in Bexar and surrounding counties surged 26.7 percent in November compared to the same period last year, according to the San Antonio Board of Realtors. The median price increased 13.1 percent to $260,900 and inventory fell to two months.
“As people sell their houses, you create a strong move-up market, and so it’s creating a lot of buyers,” Inselmann said. “(It’s) just a culmination of factors that we probably didn’t think would work together in such a way six months ago but has helped stabilize the housing market and take it to great gains.”
Builders are adding more homes in lower price ranges, which is good news for families struggling to find more affordable properties in a tight market. To make it more feasible, companies are constructing houses on smaller lots.
Of the 15,033 housing starts so far this year, around 6,700 are priced under $250,000, Inselmann said. It’s not enough to correct a shortage of lower- priced homes in the area, which he puts at around 25,000 to 30,000, but it’s rising.
“We had seven or eight years where we weren’t building enough,” he said. Many of the new homes — just over 28 percent — are being built on the far West Side. Parcels along I-35 and into New Braunfels are booming as well. But construction in southern portions of Bexar County is also accelerating, Inselmann said.
More than 1,200 homes are in the works between I-10 and I-37 around China Grove, and roughly 1,000 homes between U.S. Highway 90 and I-35. Over 400 are under construction on land between those two swaths.
At home builder Chesmar Homes’ San Antonio division, sales are up 30 percent year-over-year, said division president Ken Glass. Low interest rates are contributing to the surge.
“People see the housing market doing really well,” he said. “You don’t want to be late to the dance ... That’s created some urgency.”
Jeff Buell, co-owner of Sitterle Homes, attributes rising demand to interest rates, job growth as companies relocate to Texas and buyers wanting more space after being cooped up in an apartment. The year has “oddly been really good from a sales and starts standpoint,” he said.
With mills closed or slowing production due to the pandemic, lumber prices shot up this fall and have pushed up home prices. But Buell said he’s optimistic about business heading into 2021.
“I don’t know that it’ll spike as much as it did in July, August, September ... (but I) do expect it to be relatively strong,” he said.