Offering affordability, economic prosperity and a slower pace of life than most cities, San Antonio is a hotspot for professionals looking to balance career growth with quality of life.
“Compared to other major Texas cities like Austin or Dallas, San Antonio remains more affordable,” Will Curtis, 2024 chair of the San Antonio Board of Realtors and commercial managing director at Phyllis Browning Company, wrote in an email. “This affordability is attractive to both families and young professionals seeking to balance career growth and quality of life. … This, combined with cultural diversity and a slower pace of life than some other cities, makes it attractive for families.”
In 2023, San Antonio gained more residents than any other city, reported the U.S. Census Bureau. Today, the Alamo City has the fourth strongest housing market in the country, according to the U.S. News Housing Market Index.
But there are signs of the market cooling slightly as single-family homes stay on the market longer and sell below asking price, and the supply of multifamily homes outweigh the demand for them, leading to low occupancy rates.
“As of October 2024, San Antonio leans toward being a buyer’s market,” says Curtis. “However, depending on the neighborhood and type of home, there can still be some competitive pockets.”
Here’s how San Antonio’s housing market has evolved and what’s in store in the months to come.
[2024-2029 Housing Market Predictions]
How the San Antonio Housing Market Changed in 2023
Over the past 10 years, San Antonio has consistently ranked among the top U.S. cities for population gains recorded by the U.S. Census. But during the pandemic, low interest rates sparked additional demand from homebuyers attracted to San Antonio’s continued economic growth, warm climate and cultural diversity.
As a result, there was a 30% increase in single-family detached housing permits in 2021 compared to the year prior, but that was followed by a 26% annual decrease in 2022 and subsequent 15% annual decrease in 2023, with 8,699 permits issued.
Single-family building permits rose and fell rapidly in 2023, starting the year at 522 and peaking in October 2023 at 994 before falling to 509 by the year’s end. Single-family permits shot up as 2024 arrived, with 958 permits issued in January. By May, the peak hit 1,265 but settled down to 742 by August, a 1.3% drop year over year.
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“Single-family demand was just unable to keep up with the migration into the Alamo City, and the quicker and more effective alternative was an increase in multifamily units,” says Curtis.
As a result, multifamily permits rose a whopping 149% annually from over 5,600 permits in 2021 to more than 14,100 in 2022, according to the U.S. News Housing Market Index. By the end of 2023, as multifamily demand waned, the number of permits issued dropped 46% to 7,658.
That trend continued in 2024, with 1,575 multifamily permits issued in the first seven months of 2024, down 73% from the same period in 2023.
“We are seeing more demand for single-family homes rather than multifamily homes,” says Curtis. “One trend that many may notice is that units with three or more bedrooms are seeing a higher level of vacancy than those with two or less. This can likely be attributed to those in three bedrooms who have chosen to move into single-family homes rather than continue to rent in a multifamily complex.”
Preference for single-family homes has played out in the number of building permits approved. After the more than 14,100 multifamily permits approved in 2022, permits dropped by nearly half to about 7,600 in 2023. There were 1,575 multifamily permits approved January 2024 through July 2024, compared to 5,912 over the first seven months in 2023, down 73%. As for single-family detached housing, there were 6,916 permits approved January 2024 to July 2024, up 36% from the 5,090 permits approved in the first seven months of 2023.
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San Antonio Housing Supply and Demand
While San Antonio started 2020 with a housing supply of 4.42 months — four to six months is considered a balanced market — the city hit a low of 1.05 months by July 2021.
San Antonio’s housing supply steadily climbed from a low of 1.2 months in March 2022 to a peak of seven months in December 2022. But supply dipped again to just over two months in May 2023 and then proceeded to fluctuate between three and more than five months for the remainder of 2023 and through mid-2024, settling at 4.3 months in August, up nearly a month year over year.
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A more normalized market means individuals ready to move from a multifamily property to a single-family property have more options than were available in the last few years, says Curtis.
But that also means there’s less interest in the increasing amount of multifamily homes that were recently built, leaving San Antonio with a volatile rental vacancy rate. In June, the vacancy rate was 7.4%, an 0.8% decrease from a year ago, and a significant decline from the peak of 11.9% in October 2023, but still higher than the national average of 6.3%.
And the high vacancy rate is hitting hard with landlords, who are also facing insurance costs that have risen as much as 50%, coupled with property taxes and higher personnel costs, Kyle Ward, executive director of San Antonio Apartment Association, wrote in an email.
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“Properties found it necessary to offer incentives like free rent for one or more months,” says Ward.
Looking at mortgage applications, the Mortgage Bankers Association reports its seasonally adjusted Purchase Index decreased 0.1% in the week of Oct. 4, compared with the week prior, indicating the slightest decrease in mortgage loan application volume for new mortgages. The unadjusted Purchase Index was 0.1% above the previous week and 8% higher than a year ago.
“The largest constraint for many prospective homebuyers over the past year had been the lack of inventory,” said Mike Fratantoni, Mortgage Bankers Association senior vice president and chief economist, in a press release. “Now, there are more homes available in many markets across the country, and with mortgage rates still low compared to recent history, at least some potential homebuyers are moving ahead.”
Consumer sentiment in the U.S. was at 68.2 out of 100 in June, based on the Survey of Consumers from the University of Michigan. It’s up 3.8 points compared to the same time in 2023, indicating higher confidence in the current state of the economy.
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[Read: How Does Selling a House As-Is Work?]
Median Home Price in San Antonio
The median home price in San Antonio is $305,000, down 4.4% compared with August of last year. “Homes are selling slightly below asking price, averaging 2.21% under list price, which further supports a buyer’s advantage in negotiations,” Curtis says.
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Rent prices have fallen 4.3%, averaging $1,505 a month as of August 2024, according to the Housing Market Index. It’s well below the national average of $2,070.
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Unemployment Trends in San Antonio
More than 1.1 million people were employed in nonfarm positions in July 2024 in the San Antonio-New Braunfels metro area, with an unemployment rate of 4%, according to data from the U.S. Bureau of Labor Statistics. Unemployment is down 0.2% year over year. Comparatively, the unemployment rate nationwide was 4.3% in July.
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“San Antonio boasts a diverse economy with strong sectors in health care, bioscience, tourism, military and cybersecurity,” says Curtis. “It’s home to major employers like USAA, H-E-B and various military installations such as Joint Base San Antonio, contributing to steady job growth.”
The defense sector and related industries form an ecosystem around Joint Base San Antonio, as well as a growing tech industry.
San Antonio’s strong job market is part of why foreclosures are rare in the metro area. According to Black Knight, just 0.3% of properties were in foreclosure in August, down 0.1% year over year. That’s in line with the national rate.
With the Census Bureau’s American Community Survey reporting a population of 1,495,295 in July 2023, up by roughly 22,000 residents compared with the previous year.
Builder Confidence in San Antonio Wanes
The National Home Builders Association and Wells Fargo Housing Market Index reported homebuilder sentiment in the San Antonio-New Braunfels metro area was rated 39 out of 100 in August, down 19 year over year. While it’s fluctuated in recent years, builder sentiment has dropped more than half from a high point of 89 in December 2021, just ahead of the multifamily building boom.
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“The significant decrease in starts for multifamily projects is a little more complicated. Part of this trend is based on consumer choices. The other reason for the slowdown is the complications in the lending market,” saysCurtis. With the increase in inflation, there was also an increase in commercial mortgage rates, increasing three to four times than when they originated, he adds.
“What this means is that many of the properties have more risk than when the loan originated, and lenders are slowing down lending in the multifamily sector until more of that risk is mitigated,” says Curtis.
Multifamily homeowners recognize about eight cents out of every dollar after overhead and other rising costs are paid, says Ward.
Nonresidential construction, which is measured using architectural billings, declined 2.6 points year-over-year, according to the Architecture Billings Index rating of 46.3.
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San Antonio Real Estate Market: Predictions
An increase in single-family permits will slowly increase the most desirable housing supply, providing more options to the buyers who are able to enter the market after the interest rate cut, with the average 30-year-fixed mortgage at 6.6% as of Oct. 12, 2024.
Add in the slowdown in San Antonio’s massive population growth over the past few years, though still positive, as an added benefit to potentially providing the environment for a balanced market, says Curtis.
Coupled with a strong job market, San Antonio’s single-family housing market should remain steady for the foreseeable future, says Curtis, while volatility in the multifamily market stabilizes over time. It will take a year for additional supply to be worked off and for rent prices to move back to a normal rate.
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San Antonio Housing Market Forecast originally appeared on usnews.com
Update 10/24/24: This story was published at an earlier date and has been updated with new information.
