Is Activity in the South…Going South?

Posted in Atlanta Market, Central Florida Market, Charlotte Market, Dallas - Ft. Worth Market, Houston Market, Jacksonville Market, Naples - Ft. Myers Market, National Housing Market, Northern Virginia Market, Raleigh - Durham Market, Rio Grande Valley Market, San Antonio Market, Sarasota - Bradenton Market, Suburban Maryland Market, Tampa Market, The Triad Market | Posted on 08-04-2014 | Written by Brad Hunter

The brad hgovernment release on housing starts for June showed a sharp decline, concentrated in what the Census Bureau defines as “The South.”  Single-family starts were down in June by 9.0% from the previous month, and down 4.3% from twelve months earlier.  Within that number, almost all the decline was in the South, down 20.1% versus the previous month and down 14.5% versus a year ago.

Rumors of the South’s demise are greatly exaggerated.

Read Full Article and See Quarterly SFD Starts

 

 

 

 

This Old Porch, This Old Price Point: An Unlyrical End to San Antonio’s Entry-Level Housing

Posted in Austin Market, Dallas - Ft. Worth Market, Houston Condo Market, National Housing Market, San Antonio Market | Posted on 07-10-2014 | Written by Jack Inselmann

jack iAs my good friend Robert Earl Keen has sung many times, “The road goes on forever and the party never ends…”!  Who doesn’t like that thought or feeling?  It outlines the idea that everything that is good or necessary is always right there in front of you.  It’s true that San Antonio builders have definitely enjoyed a party these last twelve months as the local market grows out of the recession. Today, however, the idea that “the road goes on forever” seems less and less realistic for the affordable, entry-level new homes in San Antonio.  A regular staple of housing supply for decades, this portion of the market has been equally important to the builders who build these homes as the families who create memories within them.  The vital portion of San Antonio’s new home market, those homes priced under $150,000, has quickly evaporated in the last couple of years.  In the last three years this price point’s share of new home starts has dropped from 30% of the market to just 6%.  Shoot, only ten years ago this price segment garnered a 63% share of all new home production – at that time an annual starts rate of 7,300; now builders can barely construct 600 homes annually.  This has to do with supply and not demand as there continues to be significant levels of demand for the more affordable product.

People will say, “San Antonio still has way more affordable product than most of the other major MSAs around the country so what’s the big deal?”  As Lyle Lovett would respond, “You say you’re not from Texas, man, as if I couldn’t tell. That’s right, you’re not from Texas.”  The big deal is that the affordable market has been arguably the most important part of housing in San Antonio for decades by creating opportunities for all people, the families, those in the community with moderate incomes.  Here locally, this remains so important because our median income lags most major markets, and in Texas falls approximately 15% below Austin, Dallas and Houston.  As a result, other areas can more easily move into higher priced arenas of housing and qualify much easier for a mortgage. In San Antonio, many qualified buyers cannot afford a higher priced product and will have to go to the resale market or, worse yet, continue to rent and not reach their homeownership dreams [one of America’s most important ambitions, by the way, but that’s another blog].  When Robert Earl and Lyle sing “This Old Porch,” the young fellow rents the porch while the weathered Texas man owns it.  It’s who we are.

Why is this happening?  Well, of course, a healthy market like ours is subject to the pricing factors of supply and demand.  Low lot availability in an expanding market leads to price increases which is impacted more today by rising development costs.  While it is easy to point to builders and developers for the increase in land and lot pricing, the unindicted co-conspirators in this equation are the municipalities and regulatory bodies that govern the housing industry with increasing fees, unnecessary delays in permit approvals, anti-development mentalities, and general anti-growth attitudes.  Maybe more importantly, the sincere lack of interest on the part of cities and counties to allow more density, and therefore more affordability and accessibility, hurts families on the lower to moderate income spectrum.  Not quite fair is it?  Without a change in mentality in these areas, Willie Nelson might be right: “Turn out the lights, the party’s over.”

Though the focus of this narrative is the new home product under $150,000, it must be noted that the $150,000 to $200,000 housing product has been put on the endangered species list and has only a few years left under current environments.  This growing trend, this pricing squeeze, is happening in the other Texas markets and we all can tolerate only so much cost increase before it slows down the overall growth pace.  There is much more to say but this will suffice for now.  As a good friend told me one time, “Jack, I could listen to you talk all day, and for a moment there I thought I was going to.”

As an encore, I think this is a watershed moment for San Antonio, many would say a sad moment.  The fundamental pricing of bringing a lot to market has jumped up recently and it is more likely to stay the same or rise even higher than it is to drop back down.  If this is true, it would mark the end of San Antonio’s traditional price point, the price point of my first home, the home my boys grew up in.  On that note, I let Jimmy Buffett take us home: “It’s been a lovely cruise.” Too bad it has to end.  If that’s the case, I think I’ll join Mr. Thorogood on the deck for “One bourbon, one scotch, and one beer…”

Texas Housing Survey: The Coming Affordability Squeeze

Posted in Austin Market, Dallas - Ft. Worth Market, Houston Condo Market, National Housing Market, San Antonio Market | Posted on 07-01-2014 | Written by Metrostudy News

Metrostudy_Texas_starts_by_market final

July 1, 2014: Houston Texas – Metrostudy’s 1Q14 survey of the Texas Housing market shows even as housing continues to boom, new and lower income buyers are getting priced out of the market.

Texas right now is home to the strongest housing markets in the entire country. Texas was on a different cycle long before the boom and the bust came along. Driven by past swings in oil prices, the state was already on a rapid-growth trajectory before the rest of the country went on its early-2000s building binge. Said colloquially, when Phoenix and Las Vegas caught pneumonia, Houston sneezed and kept on going, right to the top of the national market list.

The impact of the fracking revolution cannot be understated. With oil prices well above the $75 per barrel threshold of profitability, the energy sector has been supercharged, and this has fed the growth of housing demand. Houston has been the main beneficiary of this, but the entire state has felt the heady effects. The impact of the energy boom has been felt in all businesses in Texas.

“As strong as the Texas markets are, there is one thing missing: a strong first-time home buyer segment,” said Metrostudy’s Chief Economist Brad Hunter.

In all four housing markets in Texas, developers and builders are shifting away from affordable or “entry-level” product towards higher priced “move-up” housing. There are a number of factors that have contributed to this shift, but they all come back to margins. “The costs of nearly every input including land, materials, and labor have seen sharp increases during the housing recovery. In order to mitigate these increased costs, builders have chosen to construct more homes at higher price points (and fewer at lower price points) in an effort to maintain their profit margins. In addition, the scarcity of housing product in many Texas markets has increased prices that builders are able to charge home buyers for the same product. As a result, the quantity (and proportion) of homes built priced less than $150,000 has dropped dramatically during the last three years.

In Austin, during the four quarters ending 1Q12, 13.3% of all new housing starts were priced less than $150,000.  By 1Q13 that percentage had decreased to 11.1% of annual starts, and as of 1Q14 only 4.3% of annual starts in Austin were priced under $150,000. During that same period, starts on homes priced greater than $300,000 grew from 22.2% to 36.4%.

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“As more builders focus their product to the buyer from $300,000 to $500,000, others are employing creative solutions to bring product to market that is more in-line with the historical pricing trends in Austin. Some of these tactics include introducing the detached condo product, entering new submarkets, or even expanding the range of gentrification. Austin continues to expand the heart of its new home market while these creative solutions add diversity to the market’s housing mix,” said Madison Inselmann, Regional Director of Metrostudy’s Austin market.

In Dallas/Ft. Worth, 13.7% of annual starts were priced below $150,000 as of 1Q12. That proportion has decreased to 6.5% as of 1Q14. During the same period, starts of homes priced greater than $300,000 grew from 28.7% to 41.9%

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“New homes priced under $150,000 are rapidly disappearing from the market because of shrinking lot inventory, rising land and construction costs. There are just over 5,000 developed lots available for home in this price range and they are not being replaced. Only 2% of the new lot deliveries in Dallas-Fort Worth last year were for homes priced under $200,000. Buyers searching for a new home in this price range are being pushed to the existing home market in most submarkets. They may soon be forced to stay in the rental market,” said David Brown, Regional Director of Metrostudy’s Dallas Ft. Worth Market.

In Houston, 19.1% of annual starts were priced below $150,000 as of 1Q12. That proportion dropped to 16.3% in 1Q13 and has since declined to only 9.8% as of 1Q14.  Meanwhile, the proportion of home starts priced greater than $300,000 grew from 27.7% to 39.4%.

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“Housing production is still struggling to catch up to burgeoning new-home demand, so more expansion is on the way. The pace of job relocations into Houston will be slower this year than the breakneck pace of 2013, but the influx of companies and workers will continue to support demand growth,” said Brad Hunter, Metrostudy’s Chief Economist.

In San Antonio, 18.6% of annual starts were priced less than $150,000 in 1Q12. Since then, this share has declined by 11.3% to only 7.3% of all annual starts as of our most recent survey. Builders in this market have increased the proportion of homes started in the “move-up” market over $300,000 from 18.7% in 1Q12 to 29.2% as of 1Q14.

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“San Antonio has historically been one of the most affordable new home markets in the country. Recently it has become increasingly difficult to build a home priced below $150,000 in San Antonio,” said Jack Inselmann, Regional Director of Metrostudy’s San Antonio Market.

Combine this with the fact that incomes are not rising at the pace of rising housing costs, and the end result is buyers are being priced out of the market, effectively limiting the pace of housing growth. “This is not to say that San Antonio is not a healthy housing market, by any means, as indicators point to a market that should enjoy 8,000 to 9,000 home starts again in 2014,” said Randall Allsup, Senior Consultant of Metrostudy’s Texas market.

In all the Texas markets, the first-time homebuyers have been given less attention by many public builders, but we do anticipate a return of entry-level demand (and product that serves those buyers) in the next year, gaining even more momentum in 2015 and beyond. DR Horton and LGI are the tip of the spear for the entry-level right now, but we are expecting others to follow suit over the next few years. Continued momentum in labor markets will support more household formations (20-somethings moving back out of their parents’ basements), and more reasonable mortgage requirements by the banks will help as well.

For information contact:
Danielle Fiore @ 813-443-6504
dfiore@metrostudy.com

About Metrostudy

Metrostudy, a Hanley Wood company, is the leading provider of primary and secondary market information to the housing and related industries nationwide.  Established in 1975 in Houston, Metrostudy provides research, data, analytics and consulting services that help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day.  www.metrostudy.com

About Hanley Wood

Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

Housing Market Metrostudy 1Q14 Survey Results: San Antonio New Home Market Remains Strong

Posted in San Antonio Market | Posted on 05-07-2014 | Written by Metrostudy News

May 7, 2014: “The San Antonio housing market starts off the year in fine shape with good new home production in the first quarter,” says Jack Inselmann of Metrostudy.  “New home inventory is still very tight, home prices are increasing and housing values are improving.”  In addition, new lot delivery has finally caught up with demand thereby beginning to fill a void that has impacted production over the last couple of years.  “The annual starts increase over a year ago is negligible in comparison but only because of the loss of the low end market in the San Antonio area, the one significant negative in the local market,” says Inselmann.

In 1Q14 there were 2,192 single family starts which is a 7.0% increase when compared to the 1Q13 rate of 2,048.  The current Annual Starts rate is 8,526 which is 0.3% higher than the 1Q13 annual rate of 8,505.  1Q14 closings totaled 1,955 which is a 4.3% increase over the 1Q13 rate of 1,875.  The current Annual Closings rate is 8,256 units, a 5.7% increase over the 1Q13 annual rate of 7,813.  Housing priced $300,000-500,000 [+33%] and $500,000+ [+28%] are exhibiting robust growth trends with the 1Q14 analysis.

Developed lot inventory has increased each of the last three quarters thereby increasing the overall lot supply from 17,002 lots in 2Q13 to 18,384 lots as the end of the first quarter of 2014.  This has helped to stabilize the lot inventory and provide relief to high demand areas that saw their lot supplies diminish over the last three years.  Of course the key difficulty remains in keeping lot costs in line with the San Antonio affordability ratio where it is now virtually impossible to reproduce lots for new housing priced under $175,000.

For information contact: jack inselmann @ 210.710.3635
Email jacki@metrostudy.com

About Metrostudy

Metrostudy, a Hanley Wood company, is the leading provider of primary and secondary market information to the housing and related industries nationwide. Established in 1975 in Houston, Metrostudy provides research, data, analytics and consulting services that help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. www.metrostudy.com

About Hanley Wood

Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

San Antonio market improves though builders still say ‘Show me the Lots’…

Posted in San Antonio Market | Posted on 02-21-2014 | Written by Metrostudy News

(San Antonio, TX – February 21, 2014) The San Antonio housing market had another very good year in 2013 continuing its recovery from the depths of the recession.  Single-family starts and closings increased, housing inventories remain very tight and healthy, with new home prices rising and housing values improving.  ”This market is in great shape as we enter 2014 with expectations of above average economic growth to fuel the recovery even further”, said Jack Inselmann, Metrostudy’s Regional Director of the San Antonio market.

The count from Metrostudy’s quarterly survey shows the San Antonio new home market to be growing at a moderate pace compared to 2012. Housing starts increased 3.3% in 2013, with 8,363 units, over the 2012 total of 8,089.  New home closings increased from 7,430 units in 2012 to 8,154 in 2013, a 9.7% improvement. “New home activity would have increased even more if not for the shortage of lots overall and virtual lack of lots for the more affordable product that is necessary for the San Antonio area”, said Inselmann.

At the end of 4Q13 total housing inventory remains at low healthy levels. There were a total of 4,399 homes in inventory (Models, Finished Vacant and Under Construction) at the end of 4Q13, which represents a 6.5 months of supply based on the current Annual Closings rate. This amount of inventory is basically unchanged over the last few years and as a result the San Antonio area remains one of the tightest and healthiest markets in the nation.

In the fourth quarter of 2013 Metrostudy recorded 17,649 vacant developed lots in the San Antonio market, an increase of 465 lots since last quarter and 572 more than a year ago. Based on the current annual starts rate, this lot total represents a 25.3 months supply of lots. Lot delivery has thankfully improved over the previous year though develop time has increased 25-50%, and is expected to increase again in 2014 thereby alleviating some of the lot crunch that beleaguers builders in all areas.

About Metrostudy

Metrostudy is the leading provider of primary and secondary market information to the housing and related industries nationwide. Metrostudy provides research, data, analytics and consulting services to help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. For more information, visit www.metrostudy.com

About Hanley Wood

Hanley Wood, LLC is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

Austin Roadways: A Problem Big Enough to See From Space

Posted in Austin Market, San Antonio Market | Posted on 10-24-2013 | Written by Madison Inselmann

Space is awe-inspiring.  Not necessarily a controversial statement, but at the same time, I think it’s a feature worth reflecting upon.  Our curiosity in the night sky is an interest that connects all humans across the globe.  In the last 100 years or so, our work toward entering the night sky has yielded innumerable products that we now use daily: baby food, scratch-resistant lens, water filters, hand-held power tools, the phrase “it’s not rocket science!”  The latest is this long line of space-aided advances is a perspective into the transit short-comings in the Central Texas area.  Last week, NASA astronaut Karen Nyberg tweeted the below photo, providing an outsiders perspective into Austin’s troubles.

AustinSanAntonioFromSpace-cropped (2)

Source: Karen Nyberg, Astronaut NASA

The photograph depicts the night light scene along Interstate 35, connecting Austin to the north with San Antonio to the south.  As the lights show, San Antonio’s looped highway structure increase the accessible area around the city, allowing residents to get around efficiently, even if they choose to live outside the inner core.  The lights also show Austin’s looped highway city to be as loopy as uncooked spaghetti.  As a result, high speed access has a limited reach.  To boot, for anyone who has to commute daily to work, Interstate 35 and “Loop” 1 (aka, MoPac) can’t honestly call themselves “high speed” roads, at least while the sun is up.

In the last six weeks or so, half the conversations I’ve had have been with outside interests; people who’ve heard of the real estate market and are looking for opportunities to get involved here locally.  During these talks, the most common questions, obviously, is “where is the growth going?”  Astronaut Nyberg’s photo hints to the limitations of growth.  Austin already houses a few areas that are not able to be developed due to environmental and water issues, some of which have slowed roadway development as well.

As a result the factors limiting further expansion, the submarkets with mature roadways have benefited the most in the boom of the last couple of years.  US-183, jutting northwest from Austin, has been one of the most active corridors for the last ten years and has strengthened its activity in the last eighteen months.  Similarly, SH-71, the faintly lit highway pointing immediately west of Austin just to the south of Lake Travis, has seen robust growth in the last two years.  Benefitting from unparalleled views in production home developments, this roadway has experienced a surge of new developments and new home construction in an area once thought to be too far for commuting.  Without continual work, however, this area will grow to face the current issues plaguing the older areas of the metropolitan area.

When times are good, we tend to believe that “the sky’s the limit.”  However, if we can’t get there, we can’t grow there (efficiently).  Austin residents are experiencing the traffic struggles of a failed “if we don’t build it, they won’t come” strategy.  San Antonio’s planning has done a good job of lighting the way for future suburban development.  Austin developers are getting as creative as Tom Hanks’ crew from “Apollo 13”.  It’s time for political leaders to say out loud, “Austin, we have a problem.”

Housing ‘Affordability’ in Texas

Posted in Austin Market, Dallas - Ft. Worth Market, Houston Market, San Antonio Market | Posted on 09-13-2013 | Written by Madison Inselmann

Webster’s dictionary defines “affordable” as…a terrible way to start a blog.  The term affordability means different things to different people.  To me, “affordable” means buying Aggie football tickets that cost less than the hotel room I reserved.  For my neighbor, who drives a Mercedes, “affordable” means buying a luxury car while renting a 950 square foot apartment.  To City of Austin leaders, “affordable housing” means a residence that a family can purchase who make less than 80% of the city’s median income.  Affordability for today’s purposes will be the ability of the median income to qualify for the median home in the market.

Texas’ recovery has been highly touted and rightfully so.  It started notably earlier and notably stronger than any other state, not to mention the nation as a whole.  Job growth over the last three years has translated into robust home demand across the state (new, resale, and rental).  The strong growth in demand has outpaced the ability to replace new lots, resulting in declining inventory levels.  As the holy cross of economics dictates, when supply is tight and demand is up prices strengthen accordingly.  Each of the major Texas markets has experienced home price increases, both new and resale, an encouraging trend for the market overall.

When interest rates jumped in the middle of the summer, the consumer lost some purchasing power.  While it is important to remember that today’s rates still rank extremely favorably when looked at in a historical context, the impact of the rate increases against strengthening prices is worth some examination.  In the image below, the major Texas metropolitan areas are ranked by “affordability” the comparison of the median home price with the median household income.

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Fort Worth, with the lowest median new home price in the state, leads the way in affordability despite a relatively low median income.  Interestingly, Dallas is second in affordability thanks in part to the strongest household income in Texas.  Austin stands alone as having the greatest divide between median income and median home price.  Austin’s income ranks second highest amongst the state’s metropolitan areas at $56,076 per household.  Nevertheless, the median new home price growth over the last two years (+17%) has outpaced wage growth leading to a nearly $30,000 discrepancy between what the median household can qualify for and what the median home available in the market today.

To correct this imbalance, you can either pay employees more money or diversify the housing supply.  During the recovery, much of the new home activity has occurred above $200,000.  In fact, over the last three years, Austin builders have doubled the number of starts occurring between $300,000 and $400,000.  This is due to the combination of who could qualify for a mortgage and where land and material price increases have pushed builders.

In the current environment, median incomes and median prices are expected to each rise, though prices tend to outpace wage growth.  This mismatch will be amplified by the steady rise in interest rates that is expected in the future.  Where we’re building and selling homes today may not match where we are building and selling homes in eighteen months depending on how well the buyer has positioned themselves for the growing interest rate environment.  It’s been a strong nine months in 2013.  It’ll take some work, and maybe some creativity, to maintain that pace going forward.

Tight Inventory, Price Increases and what’s Next?

Posted in Austin Market, Dallas - Ft. Worth Market, Houston Market, Rio Grande Valley Market, San Antonio Market | Posted on 06-05-2013 | Written by Brad Colliander

News reports during the last several weeks have highlighted that home prices are rising in the major Texas markets.  The price increases can be associated with increased demand for housing spurred by population growth, historically low interest rates and improving local economies.  With this increased demand for both new and resale homes, the supply of lots and homes has dropped below equilibrium levels.  Simple Supply and Demand economics teach us that as supply decreases, prices of remaining or replacement supply may increase.

Read the rest of this entry »

San Antonio New Home Industry Showing Strong Growth

Posted in San Antonio Market | Posted on 05-21-2013 | Written by Metrostudy News

(San Antonio, TX– May 21, 2013) Metrostudy reports the greater San Antonio new home market continues to exhibit strong growth during the first quarter of 2013. “Homebuilders entered 2013 with the strong demand and low inventory levels spurring the need for increased levels of construction.” reported Randall Allsup, Regional Director of Metrostudy’s San Antonio office. The start pace was the highest for a first quarter in five years and up 21% over 2012. “It is likely homebuilders will start over 9,000 homes in 2013 for the first time in five years.  Starts in 2013, however, will still be 50% below the peak activity level in 2006,” said Allsup.  Construction activity is expected to continue to grow over the next few years due to the low supply of new and existing homes within the region as well as strong job and population growth.

The San Antonio region is also experiencing rising home prices due to the stronger sales pace and the low level of new and existing homes for sale. There were just over 1,400 finished vacant homes in the San Antonio area, less than half the inventory just five years ago. Resale inventory is currently at a 5.4-month supply, a level that historically has indicated a sellers-market.   “It’s not just the strong demand and low supply driving up prices; builders are getting hit with increased lot costs, construction costs and labor costs. We expect to see home appreciation of more than 3% this year, with new home prices jumping 10% or more in good locations during 2013,” said Allsup.

The near record low interest rates is driving home affordability and allowing buyers to purchase larger, more expensive homes, and the tightness of the mortgage market making it difficult for first-time homebuyers to qualify, are combining to diver the higher priced market as Metrostudy reports that the new home market priced above $300,000 has seen growth of 44% in the past year. “The good news is that well qualified first-time homebuyers have been able to skip typical first-time product and purchase homes in what have historically been move-up price ranges,” said Allsup. The historically low interest rates are allowing buyers to bypass a normal move-up level and purchase a larger and more expensive home.

The increased starts pace and limited new lot development continues to drive down the lot inventory. Lot supply has fallen to 25-months from a peak of 43-months. The “A” locations currently only have a 12-month supply well below what is considered equilibrium. The top performing developments that account for 71% of the activity within the San Antonio region have only a combined 14-month supply of developed lots. “The extremely tight supply of vacant developed lots, which has led to higher land and lots costs, has spurred increased levels in new development planning, a trend we expect to continue through the remainder of the year,” said Allsup.

For information contact:
randall allsup @ 210.525.9549
email rallsup@metrostudy.com

About Metrostudy

Metrostudy, a Hanley Wood company, is the leading provider of primary and secondary market information to the housing and related industries nationwide.  Established in 1975 in Houston, Metrostudy provides research, data, analytics and consulting services that help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day.  www.metrostudy.com

About Hanley Wood

Hanley Wood, LLC is the premier media, event, information and strategic marketing services company serving the residential, commercial design and construction industries. Through its operating platforms, the company produces award-winning digital and print publications, Newsletters, websites, marquee trade shows and events, Market Intelligence data and strategic marketing solutions. The company also is North America’s leading publisher of home plans.

I told you so…

Posted in In The News, San Antonio Market | Posted on 11-26-2012 | Written by Metrostudy News

jack I