2021 San Antonio Real Estate Market Investing Forecast

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Note: Our market forecast includes San Antonio data and data from its surroundings, including New Braunfels.

Originally a Spanish outpost in the early 1700s, San Antonio has a rich history and culture you won’t see in other Texas cities. It’s home to the Alamo, the River Walk, and countless other notable sites and buildings, making it — as well as nearby New Braunfels — a hot spot for tourism and travel.

But the city’s more than that, too. A whopping 2.5 million people call the San Antonio metro area home, as do major companies like Valero Energy (NYSE: VLO), USAA, Rackspace (NASDAQ: RXT), and more. Texas grocery chain H-E-B also has its roots in San Antonio, employing more than 20,000 residents in the area.

Often dubbed “Military City,” the town also has a strong military presence and claims multiple Air Force, Army, and Department of Defense bases. Its Joint Base San Antonio, made up of three military bases, employs 80,000 people alone.

The state of the market

San Antonio is seeing some bounceback from the COVID-19-induced slowdown seen earlier last year. Still, the city’s not out of the woods just yet. While markers in some areas are improving (supply, namely), other issues still exist (unemployment, rising prices, and more). Naturally, these could pose issues for investors interested in the city.

Here are the main trends we’re seeing in spring 2021:

  • Demand is weakening.
  • Things are looking better in the supply department.
  • Rentals are in a good place.

1. Demand is weakening

The foundation’s just not there for strong demand near term. Consumer sentiment is down over 20% since last year, unemployment is at 6.6%, and the city’s still down nearly 40,000 jobs in just the past 12 months. When you throw in ever-rising rents and home prices (which have jumped 13% annually), the market gets even more challenging.

The silver lining is that San Antonio’s population is growing. The city has gained an extra 6,700 households in the last year. This could create a small increase in demand if the price is right.

2. Things are looking better in the supply department

Many supply indicators are improving, so the city could start to see some new inventory in the coming months. Builder sentiment is incredibly strong, and architectural billings and single-family permits have seen a significant bump since last year. Rental vacancies are also nearing all-time lows — a big plus for rental property investors.

Most of those are forward-looking indicators, though, and for now, supply is still very tight. The city has just a 1.7-month supply of homes, and with costs of construction at record highs, builders face serious headwinds in abating that problem anytime soon.

3. The city’s still quite affordable

San Antonio is easily the most affordable of Texas’ major cities, and despite its rising rents and home prices, it still takes only a fraction of the local income to afford a home or rental. According to Housing Tides data, it takes just 21% of local income to afford a home in the city (and that’s actually down 0.02% since last year). If mortgage rates stay low, this may help offset any future price or rent hikes that hit the area.

San Antonio housing demand indicators

All data and charts supplied by Housing Tides by EnergyLogic.

Demand is likely to weaken in the San Antonio area in the coming months. Employment is down in the metro, and consumer sentiment is even worse. When you throw in ever-rising rent and home prices, the picture looks bleaker. Overall, our data show the majority of San Antonio’s demand indicators as “unhealthy” and “weakening.”

Unemployment

Unemployment is up in San Antonio by 3.4% over the year and currently sits at 6.6%. That’s more than the current national rate but a marked improvement over the 13.3% seen in San Antonio last April. Altogether, the city has lost just under 39,000 jobs in the last year.