As my good friend Robert Earl Keen has sung many times, “the road goes on forever and the party never ends...” who doesn’t like that thought or feeling? It outlines the idea that everything that is good or necessary is always right there in front of you. It’s true that San Antonio builders have definitely enjoyed a party these last twelve months as the local market grew out of the recession. Today, however, the idea that “the road goes on forever” seems less and less realistic for the affordable, entry-level new homes in San Antonio. A regular staple of housing supply for decades, this portion of the market has been equally important to the builders who build these homes as the families who create memories within them. The vital portion of San Antonio’s new home market, those homes priced under $150,000, has quickly evaporated in the last couple of years. In the last three years this price point’s share of new home starts has dropped from 30% of the market to just 6%. Shoot, only ten years ago this price segment garnered a 63% share of all new home production - at that time an annual starts rate of 7,300; now builders can barely construct 600 homes annually. This has to do with supply and not demand as there continues to be significant levels of demand for the more affordable product.
People will say, “San Antonio still has way more affordable product than most of the other major MSAs around the country so what’s the big deal?” As Lyle Lovett would respond, “You say you’re not from Texas, man, as if I couldn’t tell. That’s right, you’re not from Texas.” The big deal is that the affordable market has been arguably the most important part of housing in San Antonio for decades by creating opportunities for all people, the families, those in the community with moderate incomes. Here locally, this remains so important because our median income lags most major markets, and in Texas falls approximately 15% below Austin, Dallas and Houston. As a result, other areas can more easily move into higher priced arenas of housing and qualify much easier for a mortgage. In San Antonio, many qualified buyers cannot afford a higher priced product and will have to go to the resale market or, worse yet, continue to rent and not reach their homeownership dreams [one of America’s most important ambitions, by the way, but that’s another blog]. When Robert Earl and Lyle sing “This Old Porch,” the young fellow rents the porch while the weathered Texas man owns it. It’s who we are.
Why is this happening? Well, of course, a healthy market like ours is subject to the pricing factors of supply and demand. Low lot availability in an expanding market leads to price increases which is impacted more today by rising development costs. While it is easy to point to builders and developers for the increase in land and lot pricing, the unindicted co-conspirators in this equation are the municipalities and regulatory bodies that govern the housing industry with increasing fees, unnecessary delays in permit approvals, anti-development mentalities, and general anti-growth attitudes. Maybe more importantly, the sincere lack of interest on the part of cities and counties to allow more density, and therefore more affordability and accessibility, hurts families on the lower to moderate income spectrum. Not quite fair is it? Without a change in mentality in these areas, Willie Nelson might be right: “Turn out the lights, the party’s over.”
Though the focus of this narrative is the new home product under $150,000, it must be noted that the $150,000 to $200,000 housing product has been put on the endangered species list and has only a few years left under current environments. This growing trend, this pricing squeeze, is happening in the other Texas markets and we all can tolerate only so much cost increase before it slows down the overall growth pace. There is much more to say but this will suffice for now. As a good friend told me one time, “Jack, I could listen to you talk all day, and for a moment there I thought I was going to.”
As an encore, I think this is a watershed moment for San Antonio, many would say a sad moment. The fundamental pricing bringing a lot to market has jumped up recently and it is more likely to stay the same or rise even higher than it is to drop back down. If this is true, it would mark the end of San Antonio’s traditional price point, the price point of my first home; the home my boys grew up in. On that note, I let Jimmy Buffett take us home: “It’s been a lovely cruise.” Too bad it has to end. If that’s the case, I think I’ll join Mr. Thorogood on the deck for “One bourbon, one scotch, and one beer…”