January 18, 2023
Photo by Brad Barmore on Unsplash
Predictions and Resolutions
It’s the New Year! Time for predictions and resolutions. We can predict 2023 will be a different sort of year from 2022, and we can all resolve to not make the same mistakes, again, and make better decisions.
However, while the questions and uncertainties that surround 2023 are titanic, hopefully they won’t sink us this year. We have to anticipate that rates will remain higher for longer, because the FED has preached that for months.
Don’t second guess them.
It all started to hit the fan last summer and became especially hard in the fall of last year. All real estate was super-hot in the spring, but the big chill hit hard and fast.
Home Building and Home Sales
Let’s start with home building and home sales which just suffered their worst sudden downturn ever.
Housing affordability declined 37%, due to mortgage rates jumping from 3.1% to 7.2% in a matter of months. The other factor in affordability is that San Antonio home prices are up 45% since 2020, according to Zonda.
Then, there is the availability issue.
Back in 2011 months on market for a home in San Antonio was about 8, with 6 months being considered a balanced market between buyers and sellers. This fell to less than a month in 2021!
Asking prices became simply the opening bid for an auction, with buyers expecting to make above asking price offers just to get to the best and final round. Unheard of in housing.
And those days quickly evaporated last spring.
Buyers have left the market because 1) they couldn’t afford the higher interest rates, and 2) they went from panting to buy real estate to being spooked away from real estate.
Huge psychological reversal, but that is the emotional trauma-drama we have experienced in these Days of COVID.
San Antonio Ranked the Top Market for Single Family Home Building
Home builders were equally stunned and dropped prices first by 10%, then 20%. Builders then had to offer interest buy downs; anything to clear inventory by end of year.
Some stopped building two-story homes and built smaller single stories, to keep their price points down. Some moved aggressively into the build-to-rent market.
Yet, PWC analysts rank San Antonio as the top market for single family home building in the nation.
The San Antonio Commercial Real Estate Market
Commercial has followed the same path as Residential – hot in the first half to hitting a brick wall in Q4.
Banks have become more conservative, requiring more equity in deals, if they weren’t already dropped.
Todd Mills of Cushman Wakefield, a top regional broker, said if you don’t have a compelling reason to sell now, then wait.
Developer Mike Lynd said we have not yet seen the bottom, but it could come later this year, or maybe even 2024.
Job Growth in the Austin-San Antonio Corridor
However, in our Austin-San Antonio Corridor, job growth is solid and will remain that way, according to the Dallas FED, though growth will slow to a crawl this year.
So, our resolution must be to remain positive, knowing that this bad patch will pass, and we can move to the next normal, next year.