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…”

First Time Buyers and New Home Demand: Reverting to Normal

Posted in National Housing Market | Posted on 07-10-2014 | Written by Brad Hunter

brad hOur forecast of rising new home demand is founded on a reversion to long-standing typical behavior patterns.

One of these relates to the “doubling-up” of households during and after the recession.  We are seeing some evidence that young people who had moved in with their parents or relatives are now finding the means and the motivation to move out and get their own place.

The Current Population Survey for 2013 showed a DROP in the percentage of 20-somethings living with parents.  (This was the first decline since 2005, back when the speculative foundations of the housing market started to crumble).  The decline may seem tiny when you look only at the percentages:  the percentage of people in the group aged 18-24 living with parents or a related subgroup fell from 56% to 55% in one year.  One should bear in mind that the magnitudes associated with these percentages are huge. The one-percentage-point decline amounts to 300,000 people who are now looking for a place of their own who were previously living in their parents’ house.

More improvement can be expected.  A recent study by the Harvard Joint Center on Housing shows that last year 2.1 million more people between in their 20s lived with their parents than would have typically been the case (based on normal headship rates).  As these people (not to mention the 300,000 people in their 30s living at ‘home’) leave the nest, often for the second time, there will be more demand for housing.  The Harvard study concludes that 2.7 million more households will form among people in their 30s over the next decade.

First-time buyers are expected to become a larger part of the housing market over the next several years.  First-time home buyers typically comprise 40% of home buyers (long-term average), and during this stage of a housing recovery, the percentage would normally be 45% or higher.  Lately, their share has been in the 35% – 38% range.

The return to normal percentages as described above will help drive household formation rates back to normal levels.  Household formation rates typically average 1.4 million per year, but lately they have been running half this rate, or less (500,000-700,000).  During economic recoveries like this one, a rate closer to 1.7 million would be expected.  Even with mortgage-qualification issues and student loan debt, a very significant increase in new households in the years ahead is a sure thing.

The troubling question remains:  how many of these will be new-home buyers?  High student loan balances will continue to make mortgage qualification difficult for many, and high land prices keep many builders from catering to this group’s needs. These will continue to be impediments, despite some recent legislative help with student loans.

What is the net result?  While most of these newly-emerging twenty-somethings will be going into rentals, the movement out of the parental home is nonetheless expected to support a series of positive steps from rentals to entry-level re-sales to entry-level new homes, and on up the ladder.  It is conceivable that household formation rates will stay below normal levels as a result of the qualification challenges and other issues, but even at lower-than-normal rates, and lower rates of home ownership, there will be a meaningful increase in new home demand for each of the next few years.

Good Times Bad Times

Posted in Twin Cities Market | Posted on 07-08-2014 | Written by Ryan Jones

ryan jFor those of you out there who are fans of Led Zeppelin…  “In the days of my youth, I was told what it means to be a man, now I’ve reached that age, I’ve tried to do all those things the best I can. No matter how I try, I find my way into the same old jam.”

Good times bad times; I’ve used this phrase many times over the past six months to characterize the housing market.  The lyrics above are from the opening track on Led Zeppelin’s 1969 debut album, introducing the world to the greatest rock band ever.  This also happened to be the song I first heard this morning while getting ready to write this article. So there is the true tie in, which is in addition to the obvious tie in from the title of the track, which characterizes the housing market today.  Which could also characterize quite a few things out there… (Economy, Weather, Minnesota Sports, Politics) Ok, politics might be a stretch. Read the rest of this entry »

Metrostudy Market Analysis: Nevada & Northern California

Posted in Las Vegas Market, National Housing Market, Northern California Market | Posted on 07-07-2014 | Written by Metrostudy News

greg gWhat’s happening in Vegas? Greg Gross, Metrostudy regional director for Northern California and Nevada, explains the steady return to a new normal for a Sin City, a housing crash epicenter, and Nor Cal’s affordability struggle in his market overview at the 2014 Housing Leadership Summit.

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%.


“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, 12.1% of annual starts were priced below $150,000 as of 1Q12. That proportion has decreased to 6.0% as of 1Q14. During the same period, starts of homes priced greater than $300,000 grew from 28.6% to 42.0%.


“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%.


“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.


“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

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.

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

Metrostudy Names Rachel Cantor Regional Director, Phoenix Market

Posted in National Housing Market, Phoenix - Tucson Market | Posted on 06-30-2014 | Written by Metrostudy News

Washington, D.C. – July 1, 2014: Metrostudy, a Hanley Wood company, announced today the appointment of Rachel Cantor as regional director for Metrostudy’s Phoenix market.

Cantor joins Metrostudy with over 10 years of residential and commercial real estate industry experience in the Phoenix market.  She has held senior level positions in acquisitions and development with national home builders in the area. She is most recently from J. P. Morgan Chase, where she focused on commercial site strategy for Card and Mortgage Banking services.  Her deep experience and relationships in the homebuilding and financial communities will continue the Metrostudy tradition of expert advice and insight to the Phoenix market.

“I am excited about this opportunity it is a chance to combine my passion for homebuilding and helping clients understand the real estate market.  Metrostudy’s changes to the Insight platform, our mobile tool, can’t be matched in the market and I am thrilled to be a part of this organization and plan our future,” said Cantor.  Rachel will oversee all operations for Metrostudy’s Phoenix market, including consulting with builders, developers and financial institutions regarding housing and economic market conditions.

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

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


Posted in National Housing Market, Northern California Market, San Francisco Market, Southern California Market | Posted on 06-30-2014 | Written by Brad Hunter

brad hHousing always swings much more wildly up and down than does the general economy.  A survey that came out a couple of weeks ago drove home for me the reason why.  The recent survey, from Hart/MacArthur, said that 7 in 10 people believe we are still in the middle of the [housing/economy] crisis, or that the worst is yet to come.  That seems unduly pessimistic, given that job growth is improving, and that can only help incomes and housing demand.

That said, undue optimism reigned before.  I had to go back to some old notes to make sure I remembered correctly just how wild people’s expectations were during the boom.  According to Fortune Magazine in 2005, a survey done by Shiller and Case revealed that 28% of homeowners surveyed in Boston, LA, and San Francisco believed that home values in those areas would continue rising at 20% per year for the next ten years.

Is there opportunity for lot development in South Florida? Why or why not…and where?

Posted in National Housing Market, South Florida Market | Posted on 06-30-2014 | Written by David Cobb

With South Florida’s housing recovery well under way, it is no surprise that backhoes and bulldozers are once again in action all across South Florida.  So, let’s take a county-by-county look at lot inventory and see where we stand.

Metrostudy’s South Florida region is comprised of eight counties.  Six are on the east coast – Indian River, St. Lucie, Martin, Palm Beach, Broward, and Dade, and two are on the west coast – Lee and Collier.

We will start with Indian River County.  We see that the annual start rate has improved from 160 new home starts in the first quarter of 2010 to 426 in the first quarter of 2014, a 166% increase.  Vacant developed lot inventory (“VDL”) stands at 4,147, reflecting a 117 month supply at current absorption levels.  Moreover, there are an additional 3,703 lots actively under development, so we can make a general assumption that, for the time being, Indian River County has more than enough lots in the pipeline to satisfy current demand.

Next up is St. Lucie County, with the largest future lot inventory in South Florida at 70,558 units.  St. Lucie’s annual start rate has improved from 67 starts in 2010 to 394 in 2014, a 488% increase.  Vacant developed lot inventory is 6,712, representing a staggering 204 month (17 year) supply of ready-to-build-on lots.  Even so, there are an additional 3,133 lots in the development stage, which implies that many of the VDL lots are in “B” and “C” locations.  Otherwise, why develop more lots? Read the rest of this entry »

Metrostudy Market Analysis: Dallas/Fort Worth Market

Posted in Dallas - Ft. Worth Market, National Housing Market | Posted on 06-30-2014 | Written by David Brown

Are the days of being able to purchase a new home in Dallas-Fort Worth under $200,000 soon to be gone?

At Hanley Wood’s Housing leadership summit last month I spoke about how the housing recovery has been led by the move-up price points.  I also spoke about the supply constraints facing the Dallas-Fort Worth market and how it is rapidly driving up the price of lots and new homes.  Builders and developers have appropriately focused their new developments in the move up price ranges.  Starts are now back to the peak level of 2006 for homes priced over $300,000 and lot deliveries are exceeding the starts pace in the $350,000 to $750,000 price range.  It has to make you question if the market can support continued significant growth in these move up price points.  Will we begin to see the starts activity flatten in the coming quarters for homes priced over $300,000?

Conversely, only 2% of the lot deliveries in the last twelve months were for homes priced under $200,000, yet 25% of the starts in the last year were for homes priced under $200,000.  Lot inventory for homes priced under $200,000 has dropped from 55,000 lots in 2005 to 13,000 lots in 2013, and they aren’t being replaced.  At the current starts pace these remaining lots will be gone in a little over two years.  As time goes by it will become more and more difficult to replace these lots because of higher land prices and development costs.  Will homebuyers who can only afford an $180,000 home be forced to buy an existing home or stay in a rental?  Will we see higher density development or smaller home sizes and higher lot to home price ratios?

What are your thoughts?

Metrostudy Market Analysis: Raleigh, North Carolina

Posted in National Housing Market, Raleigh - Durham Market | Posted on 06-26-2014 | Written by J.W. Colvin IV

“Unless you want to compare notes about nepotism in real estate, or hear my life story, please skip to the 2:50 point in the video! What I was trying to lead up to was that North Carolina, and Raleigh/Durham (the Triangle to us “Locals”) in general is a great place to live, work and more importantly build and own homes. The local chamber has stated that much in just about every marketing publication and website for the last decade. Apparently, those efforts have paid off. Not only has the region rebounded from the Great Recession, but surpassed it, at least from an employment and population standpoint.

The new home market, has been a little more challenging. The positives that have driven people to the Triangle, have also attracted home builders. Lots and lots of homebuilders. The Triangle is one of the most competitive homebuilding markets in the country. The top 25 builders, only capture 62% of the demand. That Top 25 list is not just made up of the largest national home builders (13 of the largest market cap builders traded on the NYSE are here), but also by very large and competitive local and regional homebuilders.

Something that hasn’t been attracted to the market has been land developers, or at least in the traditional sense of the term, as most new development is either builder self-developed or fee-based development. There are very few retail/market lot developers in the region, meaning that the market is only replacing – or attempting to replace – what is already in short supply. Vacant Developed Lot supply is critically low in the region, and new lot development is not keeping pace with demand. This is in turn driving up prices on land and in turn homes, which is causing some prospective home buyers to remain on the side lines. The demand is here, and plenty of it. The supply, and the ability to increase supply, is not. This is the biggest challenge facing the Triangle’s and, in my opinion, the nation’s near-term future where housing is concerned.”

Raleigh is catching up to its pre-crash norms with just 25% of lot supply meeting housing demand this year. In this market overview from the 2014 Housing Leadership Summit, Metrostudy’s Jay Colvin explains that although this North Carolina market felt a similar downturn to the rest of the county with 65-70% decrease in volume, it has regained all jobs lost since the recession.