San Antonio Express-News (Sunday)
S.A. HOUSING BUBBLE?
Unlike last bust, there’s lack of supply, with prices up
Cover: It has the feel of the mid-2000s, but this market is much different from that one.
San Antonio’s housing market is sizzling, conjuring memories of the sales boom before the last big bust.
During the coronavirus pandemic, prices and sales have surged as buyers seize on low interest rates and seek more space as they adjust to working from home.
The median price of a house sold in the area jumped 12 percent to $268,500 in March, according to the San Antonio Board of Realtors. Houses lasted an average of just 45 days on the market, down 35 percent from 69 days a year ago.
“If you look at the way prices have been going up, it’s almost behaving more like an auction market for prices, meaning that buyers are bidding up homes,” said Molly Boesel, principal economist at CoreLogic, a real estate data analytics company.
It’s a frenzy that might bring to mind the housing bubble that played a big role in the Great Recession, which began in 2008. But economists and real estate agents say the conditions affecting the current market’s hot streak are quite different — and we’re probably not in a bubble that’s going to burst.
“What we saw in 2006 and 2007 was a period of excess — excess lending, excess credit and excess with the buildup in the financial system over a period of time,” said Chris Glynn, principal economist at Zillow, a real estate company.
Jim Gaines, an economist at the Texas Real Estate Research Center at Texas A&M University, agreed, saying money then was “being thrust out into the market” by lenders as subprime mortgages and predatory lending practices mushroomed.
“Anybody that could walk in and fog a mirror got approved for a loan,” he said.
And, Glynn recalled, a flurry of risky new financial products was created in the lead-up to the Great Recession.
But lending standards have tightened since then. Prospective buyers often need higher credit scores and bigger down payments, and lenders are being more restrictive with debt-toincome ratios, Gaines said.
There was also an oversupply of houses during the Great Recession, and construction slowed as the banking crisis deepened. This time, there’s a dearth of available homes, which is driving up prices.
“We’re in the opposite situation by an extreme,” said Jennifer Shemwell, president of Phyllis Browning Co., a residential real estate company with offices in San Antonio, Boerne and New Braunfels.
The inventory of available homes in the San Antonio area plummeted to 1.3 months in March, according to the San Antonio Board of Realtors, well below the six months of supply typically considered a balance between buyers and sellers.
Available homes are being snapped up quickly. Shemwell likens the situation to the toilet paper shortage at the beginning of the pandemic, when shoppers rushed to stores and emptied shelves.
“We have many more buyers right now than there are houses for sale,” she said. “There’s a shortage, or a supply chain issue.”
It’s tight enough, in fact, that many buyers are sweetening their offers. They are offering well over the asking price, paying sellers’ closing costs, waiving protections such as the appraisal contingency and writing personal letters. In some cases, buyers are even dipping into their own pockets to fund offers that exceed the amount banks are willing to underwrite for a specific property.
New home construction is increasing, but it’s still not keeping up with demand, Boesel said. Before the housing crash, inventory stood at about 10 months nationally; now it’s about two months.
“That hangover from the last housing crash on the new home construction is really hurting supply now,” she said. “The fact that builders didn’t build or maybe went out of business — it’s left us with very few homes on the market.”
Another factor depressing supply is high materials costs, particularly for lumber. Prices