It’s no surprise anymore that the U.S. housing market is hot, and San Antonio is no exception. But, do we dare to say it is the best San Antonio has ever seen?
San Antonio has long been one of the most active new-home markets in the country and, over the last 40 years, has typically ranked top 10 in annual starts and closings. As of Q1 2021, San Antonio is currently the sixth most active MSA in the country with 17,387 annual housing starts. This represents a 23.5% increase year over year—the third largest increase of all major MSAs.
Housing demand and production had been rising here before COVID, thanks to an affordable product along with improving job numbers and increased consumer confidence. Of course, one of the unforeseen consequences of the pandemic is the extraordinary boost to the demand side. Even though this is a pandemic-fueled surge in demand, that demand comes from employed, highly qualified buyers and is not artificially driven by investors and unqualified buyers like we saw prior to the Great Recession. In 2006, the housing market collapsed almost immediately from coast to coast, but such fragility is not expected during this surge in demand.
So, how do we determine whether or not this is the best housing market San Antonio has ever seen? If we use the highest level of annual starts and closings as the only unit of measurement, the current numbers do not match up to the activity pre-recession in 2006. New-home activity in San Antonio reached 19,818 annual starts at the end of Q3 2006. Between 2003 and 2006, San Antonio averaged 15,107 starts per year, whereas 2017 to 2020 the average is 13,255, with a peak of 17,387 at the end of Q1 2021. However, if we assess the market by the quality of its supply and demand metrics coupled with the overwhelming success builders are achieving, I would agree that it should be considered the best housing market ever in San Antonio.
Of the four major Texas markets, only Austin has exceeded its 2006 peak. In addition to San Antonio, the Dallas-Fort Worth and Houston markets are still short of their peak pre-recession starts numbers. The vibrant Austin market has soared above its previous record high asserting its case for the best market in the country. San Antonio builders are up against a developed lot inventory shortfall. If San Antonio was not so undersupplied, I believe we would have exceeded this year the Q3 2006 all-time high of 19,818 annual starts.
At any rate, all other metric categories support a best-ever conclusion for San Antonio, and all should enjoy the ride.
