San Antonio Builders Scale Back
August 1, 2008
Written by Aïssatou Sidimé from the Express-News
San Antonio-area builders continued to chip away at the oversupply of new homes that has saturated the market since 2006, selling more homes than they started in the second quarter.
Local builders started 2,495 homes in the quarter ended June 30, down 35 percent from the 3,832 homes started in the second quarter 2007, according to a report released Thursday by Metrostudy, a housing research firm.
Builders sold 2,857 homes, though that’s still 26 percent fewer than the 3,864 homes they sold in the second quarter of 2007. The slowdown is part of a calculated strategy started in late 2006, builders say, to keep the market healthy by selling through the oversupply of homes that hit San Antonio that year.
“Everybody has been trying their best to reduce inventory,” said Michael Moore, president of the Greater San Antonio Builders Association and of Ironstone Development.
Since 2006, local builders have been advised to cut housing starts to a cumulative 10,000 or less for any 12-month period in order to absorb all excess homes, according to Jack Inselmann, vice president of Metrostudy’s central U.S. region.
Earlier this year, Inselmann projected the goal would be met by the end of September. The declines are well under way, with San Antonio having the tightest monthly housing inventory of the roughly 40 major markets tracked by Metrostudy, Inselmann said.
But on Thursday, he revised his target date to the end of 2008, citing the credit crunch caused by problems at Fannie Mae and Freddie Mac and rising oil prices.
Any increase in new-home sales will depend on improving consumer confidence, which Inselmann said would not occur until after the U.S. presidential election in November, as well as reducing oil prices.
Meanwhile, many San Antonio builders are cutting inventories by minimizing their number of speculation, or spec, homes — those built without a buyer.
Jim Leonard, president of Greenboro Homes, has cut his spec homes by 50 percent since January in response to a 30 percent decline in sales. He replaces the spec homes only as they sell — except in the Pecan Hill neighborhood near the University of Texas Health Science Center, where housing demand remains strong.
“The Medical Center has always been a good economic generator,” he said. “Our slowdown in that neighborhood is scant, down no more than 10 to 15 percent from a year ago.”
Leonard said he expects sales to improve in other neighborhoods as first-time home buyers begin taking advantage of the new $7,500 tax credit in the housing rescue bill signed by President Bush this week. The credit must be repaid, making it more of an interest-free loan.
Leonard said that as first-time buyers get into the market, existing-home sellers will be able to upgrade, starting a chain reaction.
“If first-time home buyers buy your house, then you will have the ability to move up, and we can get that snowball going downhill again,” said Leonard, whose average sale price is under $200,000.
Higher-priced custom-home builder John McNair of McNair Custom Homes expects it will take 12 to 18 months before the snowball hits his average price point of $575,000.
Once sales increase, developers expect to begin clearing the way for new communities, said Moore, a land developer who has not cleared any new lots in seven months.
“There is about a 34-month supply of lot. So, unless it gets worked down to 24 months, there may not be any demand for some time,” he said.
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