2021 San Antonio Real Estate Market Investing Forecast
Note: Our market forecast includes data from San Antonio and data from the surrounding area including New Braunfels.
Originally a Spanish outpost in the early 18th century, San Antonio has a rich history and culture that you won’t see in other cities in Texas. It is home to the Alamo, the River Walk, and countless other notable landmarks and buildings, making it – like nearby New Braunfels – a hot spot for tourism and travel.
But the city is also more than that. The San Antonio metropolitan area is home to a whopping 2.5 million people, as do large corporations like Valero Energy (NYSE: VLO), USAA, Rackspace (NASDAQ: RXT), and others. The Texan grocery chain HEB also has its roots in San Antonio and employs more than 20,000 people in the region.
Often referred to as the “military town”, the city also has a strong military presence and claims several Air Force, Army and Defense Ministry bases. The San Antonio common base, which consists of three military bases, employs 80,000 people alone.
The state of the market
San Antonio is recovering somewhat from the COVID-19-induced slowdown seen early last year. Still, the city is not out of the woods. While the markers are improving in some areas (namely supply), there are other problems (unemployment, rising prices and more). Of course, this could pose problems for investors interested in the city.
Here are the main trends we’ll see in spring 2021:
- The demand is weakening.
- It looks better in the supply department.
- Rentals are in a good place.
1. The demand is weakening
The foundation is simply not there for a strong demand in the short term. Consumer sentiment has dropped over 20% since last year, unemployment is 6.6% and the city has still lost nearly 40,000 jobs in the past 12 months. When you throw in steadily rising rents and house prices (which have increased 13% annually), the market becomes even more challenging.
The silver lining is that San Antonio’s population is growing. The city gained another 6,700 households last year. This could lead to a slight increase in demand if the price is right.
2. Things are looking better in the supply department
Many supply indicators are improving so the city could see new inventory in the coming months. The mood among builders is incredibly strong, and architectural billing and single-family permits have seen a significant slump since last year. Vacancies are also approaching the all-time low – a big plus for investors in rental properties.
Most of these, however, are forward-looking indicators and supply is currently very scarce. The city only has a 1.7 month supply of homes and with construction costs at record highs, builders face serious headwinds in trying to resolve this issue as soon as possible.
3. The city is still pretty affordable
San Antonio is certainly the cheapest city in Texas, and despite rising rents and house prices, it only takes a fraction of the local income to afford a house or rent. According to Housing Tides, it only takes 21% of local income to afford a home in the city (and that’s actually 0.02% less than last year). Keeping mortgage rates low can help offset future price or rental increases that hit the region.
Indicators of demand for residential property in San Antonio
All data and graphs are from Housing Tides by EnergyLogic.
Demand in the San Antonio area is likely to weaken in the coming months. Employment in the metro is falling and consumer sentiment is even worse. If you throw in steadily rising rents and house prices, the picture looks bleak. Overall, our data shows that most of the demand indicators in San Antonio are “unhealthy” and “debilitating”.
unemployment
Unemployment in San Antonio rose 3.4% over the course of the year and is currently 6.6%. That’s more than the current national rate, but a significant improvement from the 13.3% recorded in San Antonio last April. Overall, the city lost almost 39,000 jobs last year.