The San Antonio real estate market might be described as “the little engine that could,” according to Dwight Hale, broker associate with the Schrader Group.
“We’re not the most spectacular market, but we’re a very steady [one],” he said.
San Antonio’s steady growth has helped reduce its exposure to sharp downturns and made the city “one of the bright spots on the tumbling housing market landscape,” according to Emily Spicer, real estate editor for San Antonio Express News.
As the rest of the nation struggled with a housing market decline, San Antonio real estate values appreciated by 5.5 percent last year, according to DeedQuest.com. Experts predict that property values will continue to appreciate this year by 3 to 4 percent, according to the website.
“So far all the experts that we’ve talked to…have anticipated it remaining a very healthy market, certainly for the next five years and probably beyond that,” Spicer said.
![filekey=|1806| align=|left| caption=|San Antonio is the seventh most populated city in the U.S.| alt=|The San Antonio skyline and its famous River Walk|]A strong local economy
With a population of approximately 1.3 million people, San Antonio ranks as the seventh most populated city in the country, according to U.S. Census Bureau statistics for 2006. The city enjoys a relatively warm climate, with average high temperatures ranging from 62 degrees in January to 95 degrees Fahrenheit in July.
“You can play golf year-round,” Bob Leonard, chairman of the San Antonio Board of Realtors (SABOR) and RE/MAX Associate, said.
Another geographic advantage is the low risk for natural disasters such as earthquakes, tornadoes and hurricanes.
“It’s a very safe environment,” Leonard said.
San Antonio is a well-known military hub, with four Air Force and Army bases located there. The city is also known for tourist attractions such as the Alamo and the River Walk, and welcomed more than 21 million visitors in 2004, according to SanAntonioRiverWalk.com. The tourism and hospitality industry alone reaps $8.7 billion dollars annually.
San Antonio’s local economy, however, has undergone a dramatic transformation, according to Leonard.
“Our number one economy has gone from military to banking, and [our] number two economy has gone from tourism to medicine,” he said.
Washington Mutual and Citicorp are among the major banks that have established their presence in San Antonio, according to Leonard.
As for medicine, San Antonio is home to the behemoth South Texas Medical Center, which includes 45 medical related institutions. The Medical Center alone has made an annual impact of $13.7 billion on the local economy.
In addition, San Antonio has become the primary location for the military to train its medical personnel and doctors, according to Leonard.
“We have some 11,000 military medical personnel coming here in the next year and a half,” he said.
San Antonio’s economy is also becoming “much more technology-based,” he added.
A number of technology and communications companies, such as AT&T, Rackspace and ClearChannel, have planted facilities in San Antonio. Microsoft has broken ground for the construction of its $550 million data center.
The list of major corporate facilities in San Antonio goes on, from the Toyota Tundra plant in the southern reach of the city to Valero Energy Corporation headquarters. Even the PGA Tour is in the process of constructing a new 36-hole golf course north of downtown San Antonio.
Large companies are most likely attracted to the San Antonio market because of its lower costs; the cost of electricity, for example, is much lower than costs in other parts of the country, according to Michael Lewis, RE/MAX Associate.
![filekey=|1807| align=|right| caption=|Real estate prices have remained stable except for a brief bubble in 2006| alt=|The downtown of San Antonio at a distance|]San Antonio’s strong local economy has fueled “exceptional” job growth, according to Leonard. The total number of jobs has grown from 760,000 in 2004 to 832,400 in 2007—an increase of almost 10 percent over three years, according to Bureau of Labor Statistics data. The unemployment rate has remained low, at an average of 4 percent in 2007.
“I like to say that if you don’t have a job in San Antonio, it’s because you don’t want a job,” Leonard said.
Job growth is expected to maintain its healthy course, and seems to be accelerating faster than anyone anticipated, Leonard said.
“In January we added [some] 5,200 jobs in one month alone,” he said.
San Antonio real estate prices
“I think the most exciting thing about San Antonio [real estate] is its affordability, and that’s in comparison not only to the [rest of] the United States but even within Texas,” Hale said.
The median price for a single-family home was an estimated $145,000 in February, according to MLS statistics generated by the San Antonio Board of Realtors. As of publishing time, the overall median price was estimated at $164,900 by Yahoo! Real Estate.
For the city of Austin, located 80 miles Northeast of San Antonio, the median home price is considerably higher—an estimated at $289,900, according to Yahoo! Real Estate.
Prices have remained stable in spite of a brief bubble that was created in 2006—“a bumper-crop year” for housing inventory, according to Lewis.
When East and West Coast markets started to experience a downturn in 2006, investors flocked to San Antonio and purchased a great deal of new housing. However, investors soon realized that San Antonio is “not a flipping market,” Spicer said.
“The market is not…a good one for greed,” Hale said. “It’s for somebody who wants less risk [and] longer-term gains.”
Although the San Antonio real estate market is still recovering from its bout with excessive speculation two years ago, housing supply is expected to regain its balance later this year.
“We have an excess of speculation inventory on the ground…that [we need] to eradicate but we expect to have that…off the books by August—that’s the last prediction I heard,” Hale said.
![filekey=|1808| align=|left| caption=|Property values may grow to new heights| alt=|The Tower of the Americas in San Antonio|]Investment opportunities in San Antonio real estate
Property sector growth has historically been concentrated in the northern region of San Antonio, which has “some very beautiful country…[and] where the topography starts to get mountainous,” Leonard said.
However, development is beginning to shift westward as a result of certain geographic limitations. For instance, expansion grew until it reached the city of Boerne, which resisted absorption into the San Antonio market, according to Lewis.
The growth to the north has become so substantial that “the commute for the first time in history of San Antonio is a little bit of an issue,” Leonard said.
Construction costs in the north also tend to be higher, according to Spicer.
Overall, the northern region seems to be emerging as the middle to upper-middle class residential area, with many of the new white-collar employees there, according to Michael Lewis.
The downtown appears to be experiencing a gentrification trend similar to that of many other markets, and a number of developers are building high-priced condominiums and apartments in the downtown area.
“Our downtown has experienced a real renaissance,” Leonard said. “But I think they got a little bit ahead of the game….For example, we don’t have grocery stores downtown yet.”
And because of the large supply of relatively cheap land surrounding the city, “we’ve never had that need for high-density housing,” he said.
Opportunities for investment include high demand areas such as the “old money” neighborhoods of Alamo Heights, Terrell Hills and Rogers Ranch; locations near the South Texas Medical Center, where doctors and nurses are always seeking properties; and regions near military installations, where off-post housing is always in demand, Lewis said in an e-mail.
“A lot of [military] retirees are moving to San Antonio to be close to the installations, hospitals and golf courses,” he said.
But perhaps the most compelling opportunity for investment lies in property geared towards the baby boomer generation, who are just beginning to hit retirement age.
“You follow the baby boomers, and we definitely need more housing here for the empty nesters,” Lewis said.
Empty nesters are attracted to the San Antonio real estate market because of its central location, warm weather, affordable cost of living and multiple medical centers, he said. In light of the oncoming demand for housing, investors might take an interest in town home or retirement community developments.
Many empty nesters are also electing to trade down for smaller, high-quality homes and “one-story homes in particular,” according to Leonard.
“The one-stories are like gold,” he said.