Home prices are rising much faster than incomes in San Antonio and around the U.S. — but a prominent national economist said he's confident we aren't heading into another housing bubble.
The median price of a home in the local area rose by 18.4% in the last two years, from $183,200 in November 2015 to $216,900 in the same month last year, according to the San Antonio Board of Realtors. But job growth and a shortage of homes are driving up prices, not loose lending policies like in the years before the market crashed a decade ago, said Lawrence Yun, chief economist for the National Association of Realtors, at SABOR's annual housing forecast on Thursday at the La Cantera Resort and Spa.
National home sales are still 30% lower than they were before the crash, and construction starts for single-family homes are down 53%, Yun said. That indicates there isn't a glut of homes on the market, he said.
The housing market for the San Antonio-New Braunfels metro area is emerging from what was almost certainly another record year, thanks in large part to strong job and population growth. The statistics for December haven't been released yet, but 28,285 homes had been sold by the end of November, 4.2% above the number at that point in 2016, according to SABOR.
Bubble or no bubble, steeply rising home prices are limiting sales and hurting consumers, Yun said. He cited statistics showing that homeownership rates remain near 50-year lows and that potential first-time home buyers are having trouble raising money for down payments. A surge of student loan debt is another barrier to homeownership, he said — 76% of Americans who are making such payments said the debt hurt their ability to buy a home, he said.
"A lower homeownership rate is not good for the country," he said. "It is not leading to wealth buildup, particularly for the young people."
The nationwide shortage of homes is likely to become less severe this year, but not by much, Yun said. Homebuilding is being constrained by a lack of construction workers and difficulty in getting construction loans, he said.
San Antonio's inventory of available homes — measured by the average time it takes for a home to be sold if no new homes are listed — was at 3.4 months in November, only a few decimal points above the record low of 3.1 months set in December 2016. An inventory of six months indicates a balance between buyers and sellers, analysts say.
The NAR recently announced that the nationwide inventory of homes on the market also was at 3.4 months in November — the lowest it has been since the figure started being tracked in 1999.
Mark Dotzour, a Texas economist who also spoke at SABOR's forecast, said he believes that federal lending policies will loosen up, making it easier for developers to finance new subdivisions. He expressed hope that Randal Quarles, the Federal Reserve's new vice chairman for supervision, and Joseph Otting, who was recently sworn in as comptroller of the currency, will enact new policies to ease the housing shortage.
Low mortgage rates have helped fuel the growth of the housing market in San Antonio and nationwide. The national average for a 30-year fixed-rate mortgage is just under 4 percent this week, well below historical norms and down from 4.2% at the beginning of 2016, according to Freddie Mac.
Yun predicted the mortgage rate would rise modestly this year. For his part, Dotzour said he could only imagine mortgage rates rising dramatically if the Fed increased short-term interest rates too fast or turmoil broke out in the Middle East, triggering inflation by causing oil prices to spike.
Austin's extraordinary economic and real estate boom will probably rub off more on San Antonio in future years, Yun said. A city near a booming metro area "always catches up to the other market," he said. He cited the pairings of Oakland, California, and San Francisco; and Portland, Oregon and Seattle, Washington.
As Austin grows, more employees of its companies will choose to live in San Antonio for its cheaper housing costs, Yun said. That could cause prices to spike in local urban neighborhoods where well-to-do young workers prefer to settle, he said.
