“There is a general consensus that the United States is in the midst of a mild recession that will be documented by the end of the summer,” said Jack Inselmann, vice president of the U.S. Central Division of Metrostudy, a national housing tracking and consulting company. “By the time it is documented, it may already be over. The homebuilding industry is working determinedly to rid itself of any excess inventory, and in many markets that process will be completed this year, giving rise to some moderate optimism for 2009.” 

Much will depend on a return of some normalcy in the dysfunctional mortgage market, Inselmann said. “New credit and underwriting guidelines have disqualified many willing buyers, and others who are otherwise qualified have parked themselves on the sidelines in response to a general chorus of predictions that home prices have farther to fall. But the story varies by market. Markets with stable economies — those that avoided the speculative housing bubble, such as Texas and North Carolina — have experienced a more moderate bubble effect with a better near-term outlook. States and metropolitan areas with restrictive local jurisdictions that created an artificial shortage of housing over the past five years, and subsequently were the focus of speculative investors and subprime financing, are expecting a much longer bottoming process and more difficulty seeing an upturn in the next two years.” 

According to Metrostudy’s first-quarter 2008 San Antonio new-home analysis, the current pace of new single-family construction activity totaled 11,445 annual starts and 14,527 annual closings. “This places San Antonio among the 10 most-active housing markets in the U.S.,” Inselmann said. “With the consistent effort of builders to reduce the excess new-home inventory that remains, closings continue to outpace starts.” 

As forecast by Metrostudy, 2008 housing starts will continue their correction for most of the year before having a chance to bottom out by the end of the year. Even though the expected market decline is in full force, San Antonio remains one of the healthiest markets in the country, Inselmann said.  

According to the latest figures released by the Office of Federal Housing Enterprise Oversight (OFHEO), in 2007, San Antonio experienced a home price appreciation rate of 8.3 percent, which places it 22nd when compared to metropolitan areas nationwide. “However, when you look at the analysis by metropolitan areas that have a population of at least 1 million and more than 12,000 new-home starts and closings, San Antonio is ranked first in home price appreciation,” Inselmann said. “And in terms of housing inventory, San Antonio maintains one of the lowest levels of new-home inventory when compared to other housing markets in the U.S. We consistently hear of distressed housing markets around the country, but San Antonio should not be considered one of them. Although the market has its pockets of problems, we should thank our lucky stars that we live in San Antonio, Texas.”  

San Antonio recorded 2,332 single-family starts during the first quarter of 2008, a 35.3 percent decline compared to the first quarter of 2007, Inselmann said. There were 11,455 annual starts, a decrease of 6,527 units, or 36.3 percent, compared to the annual starts rate reported at the end of the first quarter of 2007.  

New single-family quarterly closings totaled 3,318 units, a 24.5 percent decrease from the 4,395 units closed during the first quarter of 2007. The annual closings rate was 14,527 units, 17.7 percent lower than the annual closings rate of 17,649 units reported at the end of the first quarter of 2007.  

The evaluation of new home activity by price range illustrates a continuing trend in the lower price ranges, Inselmann said. Homes priced below $175,000 comprise the largest segment of new-home construction. However, the market share of this segment declined from 56 percent of new home starts during the first quarter of 2007, to 49 percent during the first quarter of 2008 (from 10,042 units in the first quarter of 2007 to 5,649 units in the first quarter of 2008, a decline of 43.5 percent).  

While the market is experiencing declines in the lower price ranges, the segment priced above $750,000 continues to produce at or near record levels and reached its peak this cycle, Inselmann said. 

Total single-family inventory, which is composed of units under construction, finished vacant units and model homes, declined for the sixth consecutive quarter from the peak in the third quarter of 2006, Inselmann said. New single-family inventory totaled 6,528 units at the end of the first quarter of 2008, a 5.4-month supply, based on the annual closings rate.  

Metrostudy documented 2,934 homes under construction at the end of the first quarter of 2008 — 820 fewer units than the previous quarter.   

Finished vacant inventory totaled 2,959 units at the end of the first quarter of 2008, a 2.4-month supply and 180 fewer units than the number recorded in March 2007.

“Finished vacant inventory priced below $300,000 continues to decline. However, finished vacant inventory in all price bands above $300,000 has only now reached a plateau or continues to increase. Most price ranges have at least a 2-month supply of homes. Concerns remain about the oversupply of standing inventory, as supply has stayed above the equilibrium range for a full year. Builders have responded by reducing the number of housing starts,” Inselmann said.  

Vacant developed lot inventory totaled 28,033 units at the end of the first quarter of 2008, a 29.4-month supply, and an increase of 11.6 months since the first quarter of 2007. There were 2,847 new lots delivered to the market during the first quarter of 2008 and 2,332 lots absorbed, Inselmann said. Developed lot inventory has reached its highest point since 1992. In addition, there were approximately 13,000 lots under development at the end of the first quarter.  

A full year into San Antonio’s first major housing adjustment since the early 1990s finds the market lean and eager to take advantage of opportunities as they arise, Inselmann said. “Construction activity has pulled back, development activity has slowed, and, despite lagging consumer confidence, new-home closings declined only 17.7 percent during the first quarter. That decline was evidenced primarily in the below-$175,000 price range, the segment hit hardest by the mortgage crisis. As credit markets relax and mortgage lenders return to fundamentals, demand in that price range will stabilize. The pipeline of homes under construction offers hope for an improved inventory situation later this year, as San Antonio has the lowest months-of-supply figure of any market Metrostudy surveys.” 

In a national landscape of negative news, San Antonio remains a market that still has its positives, with job creation at an excellent rate and job announcements continuing to be posted despite a bleak national economy, Inselmann said. “While foreclosures are rising, they are not close to the point of raising alarm. And the current low mortgage rates help to increase buying power in San Antonio’s already affordable housing market.

“San Antonio is on the leading edge of recovery in the current housing downturn and continues the adjustment begun in 2007. New-home inventories are shrinking to match real demand and the local homebuilding industry will use the majority of this year to return to basics and position itself to capitalize on opportunities for growth in 2009.”