Out of 75 U.S. cities, San Antonio’s real estate market ranks 20th on the Urban Land Institute‘s list of Markets to Watch in 2016. The Alamo City moved up three spots this year while Houston dropped from the top of the list to 30th. Austin maintained its No. 2 spot but the sprawling Dallas/Fort Worth area was named the country’s top market to watch this year.
“San Antonio has a low cost of doing business and a low cost of living which are two factors that drive the economy,” said Mitch Roschelle, U.S. real estate advisory practice leader of PricewaterhouseCoopers. “When the economy is being driven in the right direction, the real estate market in that city benefits.”
Roschelle spoke at the Pearl Stable on Wednesday during the local chapter of the Urban Land Institute’s annual Real Estate Outlook Luncheon where more than 200 attendees learned about real estate trends within local, statewide, and national markets from regional experts.
Roschelle said San Antonio has what he called the “secret sauce” a makes the city likely to move up on that list in the years to come.
The cost of doing business in San Antonio is 88% of the national average, he said, and the median home price in the city is $198,000 versus the national average of $231,000.
“So, people choose to live in a place like San Antonio because its affordable, and companies come here because they can do business affordably,” Roschelle said.
That “secret sauce” might be responsible for the growth the city is already experiencing. Between 2010 and 2014, San Antonio’s population grew by 8%, making it the seventh fastest growing city in the nation, according to the United States Census Bureau.
Strong economic development, or an increase in job production, leads to a growth in housing, he said. This has already begun in the city’s urban core. The Urban Land Institute predicts a continued growth of businesses and housing in downtown San Antonio, which will attract a certain pool of people: Millennials.
“Americans are opting to rent as opposed to buy, which makes the apartment market hot,” Roschelle said. “In markets like San Antonio that will be more prevalent since the city is getting younger.”
As the cost of renting becomes higher than the cost of buying, he added, San Antonians who hope to rent property outside of downtown will benefit from the phenomenon of Millennials coming to the city.
For some, the rapid growth of the city is a concern since there are worries about a spike in real estate pricing. Roschelle said as of now the city is in good enough shape to avoid that.
“It would take a long way for housing prices in San Antonio to spike to the point where it became unaffordable,” he said.
Keith Phillips, assistant vice president and senior economist for the Federal Reserve Bank of Dallas in San Antonio, also spoke at the luncheon and said that despite the “shifting headwinds” that faced the Texas economy last year, the San Antonio economy remained sound, and even saw 3.6% job growth.
Phillips added that construction contracts were strong last year and residential construction has continued to grow in Texas.
As far as the national real estate trends for 2016, the report stated that more people showed interest in the “villes,” which refers to Nashville and Knoxville in Tennessee; and Jacksonville and Gainesville in Florida for their “faster-growing demographics, economies, concentrations in desirable industries, and, in many cases, aggressive development plans to establish growth centers within the community.”
A general interest in Florida appeared to have grown, with Miami holding its place in the top 20 and Orlando, Tampa, and Jacksonville improving in ranking.
Interest in more expensive markets such as New York or San Francisco appeared to remain attractive, the report stated, but people showed less interest in actually investing in them. A fall in oil prices would continue to affect “energy-dependent markets” such as Houston, which fell 29 spots in this year’s rankings, according to the report.
As for Roschelle, his predictions are mostly optimistic, both for San Antonio and the country as a whole.
He sees “a continued recovery in the housing market, the apartment market continuing to be hot, the warehouse distribution market continuing to be hot, and the office market continuing to expand if more jobs are created.”
*Top image: The ULI San Antonio Annual Real Estate Outlook Luncheon looks at real estate trends and forecasts. Photo by Kathryn Boyd-Batstone