San Antonio Housing Market Forecast

San Antonio may lay claim to the Alamo, a Texas Revolution stronghold, but its housing market is just as secure. In fact, according to the U.S. News Housing Market Index, it’s actually the 10th strongest housing market in the nation.

That’s even with recent hits to demand, thanks to higher mortgage rates, which have hovered between 6% and 7% for months now.

Fortunately, San Antonio’s market has been well-poised to weather the storm. Home prices are up but affordable, employment is strong, and both builder and consumer sentiment are improving. Take a look at what’s in store for San Antonio’s housing market in the months to come.

How the San Antonio Housing Market Changed in 2022

Single-family building permits nosedived in 2022, falling from 1,357 in April to just 478 by year’s end. They’ve hovered around that level ever since.

From December 2022 through February 2023, 1,507 single-family permits were approved in the San Antonio metropolitan statistical area (MSA), which also includes nearby New Braunfels. The previous year, a whopping 2,814 permits were approved, marking a 46% decrease in just 12 months.

Multifamily permits also took quite the turn in 2022, peaking at 1,414 permits approved in September and falling to 1,306 in December. They’ve continued to fall steeply ever since.

Still, permits are up considerably compared to the year prior. From December 2022 to February 2023, 3,393 multifamily permits were approved in San Antonio. The year before, it was just 1,987 for the same three-month period. That's a 71% increase year over year.

San Antonio Housing Supply and Demand

Housing supply has improved greatly in San Antonio. The MSA currently has a 3.9-month supply of homes for sale – up from just 1.5 months a year prior. It’s also well above national supply, which currently sits at just 2.6 months. San Antonio is markedly closer to the six months of supply typically considered balanced between supply and demand for listings.

Despite the improvement, local real estate agent Rich Rupp says it’s only bringing the area toward “a more balanced market.”

“In San Antonio, we are going to be short on supply for the foreseeable future,” says Rupp, who owns RE/MAX North-San Antonio.

Rental vacancies in the San Antonio area have been volatile in recent months, bouncing up, down and then back up again. As of December, the MSA had a 7.2% vacancy rate, down from the 10% seen in April but up 0.6% for the year. The area’s vacancy rate is notably higher than the national rate of 5.8%.

Higher mortgage rates are the likely culprit behind waning vacancies. As rates push some buyers out of the market, they’re forced to rent, which sends vacancies downward. Applications to purchase a home were down 8.8% from one week earlier, according to data from the Mortgage Bankers Association for the week of April 14. On an unadjusted basis, the Index decreased by 9% compared with the previous week and 36% year over year as the recent jump in mortgage interest rates rates prompted a pullback in application activity.

Those higher rates are also driving lower consumer sentiment. According to a survey from the University of Michigan, consumer sentiment is currently at 64.9 out of 100. That’s down 2.3 points compared with a year ago and is well below the pre-pandemic norm. From 2018 through early 2020, consumer sentiment sat in the high 90s.

Fortunately, Rupp says, he often sees buyers get help with those higher rates – typically by way of seller-paid buydowns.

“Sellers are more willing to negotiate,” Rupp says. “The majority of that is in the form of seller-paid closing costs, helping the buyer with closing expenses and giving them the funds to buy down their interest rate.”

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