Sky-high costs for building materials have not put a damper on San Antonio’s market for new home construction, with homeowners seemingly willing to absorb the costs in a market that is shattering records for home sale prices.

According to the Texas Real Estate Research Center at Texas A&M University, San Antonio’s metropolitan area saw 1,274 building permits issued for single family dwellings in May — down just more than 1% from April and still more than a third higher than the permits issued for the month in either 2020 or 2019.  The center’s figures come from the U.S. Census Bureau.

Meanwhile, softwood lumber prices in the past year soared to historic highs, reaching $1,514 per thousand board feet in May. The peak has receded in recent weeks but remains far above pre-pandemic prices.

“Demand remains so strong, homebuilders can basically pass those price hikes on,” said Luis Torres, a research economist at the Texas Real Estate Research Center.

Most homes for sale right now in San Antonio already were coming with a relatively expensive price tag, Torres said.

The unabated pace of housing construction in the region contrasts with national trends, where new home construction has slowed significantly.

In the San Antonio area, the median price of a new house jumped over 8 percent since last year to a record high of $238,975, according to May data from the San Antonio Board of Realtors.

Fourteen production homebuilders were contacted for this story. Several declined to comment, and others did not respond.

Madison Wilson, a spokesperson for San Antonio's Habitat for Humanity, said the nonprofit builder has "never seen price jumps like this." While the organization had weathered price increases with a warehouse stockpile of materials, it has since depleted much of them. Wilson said its home construction costs have risen $10,000 in recent weeks, though it has not passed those costs on to its homeowners, she said.

The effects of these price increases go beyond higher costs. The soaring prices of materials have made it difficult to estimate the cost of housing construction, leading to a chaotic environment in which some builders are dropping buyers halfway through the process in favor of better offers, Torres and contractors said.

“Everybody’s afraid to put out numbers,” said Ed Mickelson, a co-owner of J and E Contracting, a small contractor group that does renovations and builds custom homes. “The cost of everything’s going up so rapidly.”

His own clients have largely continued with his projects, he said, since they tend to be "more financially able."

Mickelson said some subcontractors are taking advantage of the process. It’s not rampant, Mickelson said, but he knows of some plumbing and electrical subcontractors making “ridiculous” estimates for home construction projects and seeing what sticks.

Those subcontractors’ services are so in demand, Mickelson said, it doesn’t hurt them to lose on the bid.

In a further complication, some materials simply aren’t available at any cost.

“There is a significant shortage, across the board, of random materials you would never even imagine,” said Diego Fernando, from Metro Contracting, at a recent luncheon for commercial real estate professionals. “One day, you go and there’s just no PVC [pipe]. There just isn’t any. And you have to make a decision about what to use instead.”

Last year was the best year on record for homebuilders. A record-setting 6,400 new homes sold, according to the San Antonio Board of Realtors. While the pace in 2021 so far has flattened — with only a 1.8% increase in May from April, according to the latest figures from Zonda, a housing industry consulting firm — it does so from tremendous heights.

Waylon Cunningham

Waylon Cunningham writes about business and technology. Contact him at waylon@sareport.org.