The grass may still be greener, but in San Antonio, backyards are getting considerably smaller as lot sizes for new homes shrank last year.
Area homebuilders doubled the number of homes they built on the narrower 40- and 45-foot-wide lots between 2018 and 2019 as they worked to meet the demand for more affordable new homes.
It’s a trend that forecasters predict will continue into 2020. Despite political turmoil in Washington and ongoing trade wars, home-buying remains strong, driven by low interest rates, robust job growth, and a healthy economic outlook.
That means both buyers and builders in San Antonio can expect an even better year than last, according to housing industry analyst Jack Inselmann who presented his annual forecast Thursday at a meeting of the Greater San Antonio Builders Association.
Inselmann said Texas is first in the nation in housing production, and San Antonio ranks eighth among the nation’s largest markets, up from 18th two years ago. A total of 12,751 new homes were sold in 2019, most of them (4,500) priced in the $200,000 to $250,000 range. That’s up from 3,500 in 2018.
In 2020, he predicts housing starts will increase from last year’s 13,740 to 15,000 or more.
“We’re in a position that we can grow that number,” Inselmann said. “We’ve got the demand for new housing, especially on the affordable side, because most of the growth is going to be in the under $200,000 [and] $200,000 to $250,000 [range].”
New home construction in San Antonio has been on the upswing since 2011, with the growth limited only by the supply of lots available to homebuilders. In the past two to three years, wet weather conditions contributed to a reduced supply and contractors worked to catch up to the demand.
In 2019, the number of new lots delivered for homebuilding increased markedly, and lot absorption – the rate at which new homes are sold – kept pace. By the fourth quarter of last year, there were 18,000 home lots under construction in San Antonio.
New housing units on which construction has started – known as housing starts – that are priced under $200,000 as well as those in the $250,000-$300,000 range also went up. But home starts in the $300,000-and-up price range remained flat.
In 2018, the median price of new homes in San Antonio was $270,000 and in 2019, $259,000. San Antonio is the only major market in the United States that saw the median home price go down, Inselmann said.
Most home starts – making up 30 percent of the market – were located on the far West Side all the way to the Bexar-Medina county line, Inselmann said. But the far Northeast Side of San Antonio into New Braunfels is another hotspot for new home construction and Inselmann predicts increases on the South Side as well.
But in a state where wide-open spaces are the rule, perhaps the most remarkable trend in homebuilding is the growing number of houses being built on narrow lots.
Nationwide, total median lot sizes for single-family detached homes have been shrinking steadily, from 10,000 square feet in 1992 to 8,600 square feet in 2018, according to a study by the National Association of Home Builders. Median lot sizes vary widely by region, with the lowest in New England, where zoning tends to favor density.
Last year in San Antonio, more than 1,300 home starts began on 40-foot lots which are typically about 4,800 square feet, and 3,000 are under contract, Inselmann said. The area with the greatest number of homes built on smaller lots was the far West Side.
“Forty-footers are new to the market and a big part of the story,” Inselmann said. “How do you get more affordable? You either get smaller lots, a smaller house, or both. So that’s what we’re seeing out there in San Antonio.”
Jon Hockenyos, president of the economic strategy firm TXP, said it’s critical to come up with more ways to keep housing affordable. “If you make the median income in either Austin or San Antonio, to afford the median rent or buy the median house, you’ve got to have two income earners in the household – one job won’t support housing,” Hockenyos said.
He cited rising land costs, environmental regulations, and high development costs as contributing to pricing some would-be buyers out of the home market.
Michael Shannon, director of the Development Services Department for the City of San Antonio, said Thursday it’s good to hear that affordable housing options will grow. His department is working to approve permits faster to help with affordability, he said.
The housing forecast, he said, will be taken into account this year when the City conducts its review of the Unified Development Code (UDC), which regulates zoning and development, a process undertaken every five years.
“It’s not just the [UDC], but it’s the building-related codes and the construction codes as well that are being looked at, so this is an important piece,” Shannon said. “But housing affordability is always a component of how do we ensure quality construction and good development in our city, as well as keeping it as affordable as we can for our residents.”
Erika Blythe, a senior land acquisition manager for Gehan Homes, said she agrees with forecasters who said 2020 could be a really good year for the industry. Gehan Homes builds houses priced just under $200,000 up to $500,000 throughout Texas and in Phoenix.
In the master-planned Veramendi neighborhood in New Braunfels, Gehan is building homes on 40-foot lots that Blythe said appeal to retirees and those looking to downsize. They are priced between $230,000 and $270,000.
As single-story houses, they have a small front yard, due to setback restrictions, but little to no backyard. “It’s low maintenance, but it’s intimate,” she said.