Home building drops, but appears to be in slow recovery

Sara Turner Commercial Business July 06, 2011 0

After riding a speeding train up and then limping through a downturn, home building in San Antonio is moving at a walker’s pace.

Although new-home starts dropped 15 percent in the second quarter of the year compared with the same months last year, the market appears to be stepping forward in an agonizingly slow recovery, but a recovery nonetheless, according to a new report from the housing research firm Residential Strategies Inc.

The dropoff in home starts from 2,382 in 2010 to 2,028 this year wasn’t unexpected since last year’s market had the caffeine boost of the now-expired federal tax credits for homebuyers.

“To only drop 15 percent I think is positive considering where we’ve been, and how long and painful the road has been,” said Cassie Gibson, senior vice president of research and consulting for Residential Strategies.

At 7.3 percent, San Antonio’s unemployment rate is lower than the state as a whole, Gibson said, and builders closed more homes in the second quarter this year than they did last year.

Second-quarter data also shows a continued shift in market activity, with a decline in the under-$200,000 price point but growth at the upper end of the market.

Over the past four quarters, builders started 29 percent fewer homes priced below $200,000.

Meanwhile, the number of starts for homes priced above $200,000 has increased by 3.5 percent, and it appears that slice of the market has stabilized.

Buyers of entry-level new homes, who often don’t have huge amounts of cash for down payments or who may be working through a blemished credit history, are having a hard time qualifying for mortgages.

“Your credit score has to be impeccable, and you have to have a good down payment,” Gibson said.

So although the median price of a new home increased to $196,106 in San Antonio, up 6.4 percent, that’s due to the shift in activity to the upper end of the market — not that homebuyers have not been paying higher prices for homes.

“We aren’t really able to charge more for the same house today than we were a year ago,” Gibson said. “The market is still demanding the best possible value. You’re still getting a lot of negative news on the national level. Most of the buyers still think the market is challenged, and they can really garner a good deal.”

Bob Gardner, CEO of Legacy Mutual Mortgage, said that by the end of the year, the real estate market data could look much like 2010′s, but that the trend will be better.

“The market is moving in the right direction,” he said. “It’s going to be real slow growth for a period of time, but it is going to be a little bit of growth. I don’t see it will get worse than it has been.”

There are 32,775 total vacant lots in the San Antonio area, according to Residential Strategies. That’s still considered an oversupply that developers and builders need to whittle down.

But James Gaines, research economist with the Real Estate Center at Texas A&M University, said the large number disguises that fact that across San Antonio and other major Texas cities, there’s a shortage of available lots in the most desirable neighborhoods.

“The total lot count may still be high, but that’s because we built a lot of lots in places no one wants to be,” Gaines said. “It’s the fickleness of the market. We don’t really have a whole lot of lots where we want to have them, and we can’t move them around.”

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