Accumulation Season is in Swing: Investing in San Antonio, TX

[Christopher Campbell]

Good Afternoon Investment Community! I hope you're having a great Holiday season! Like this post if you live here and enjoy that we're in December and temperatures are in the 60s-70s during the day! 

I wanted to share some insights into the market here and hopefully spark a good conversation about what other agents and investors are seeing. 

Accumulation season is in swing!

These graphs were pulled from Infosparks off the MLS. They show the Average and Median home price sales for SFDs across Bexar County (San Antonio's dominant county) since 2015. We're headed into the winter months which traditionally are the slower months - Less retail home buying, sellers accepting lower prices, the cyclical dip in the market. We've seen a strong bounce back from the COVID stoppage and the agents/investors I work with are noticing things are still in full gear headed into the beginning of 2021. Check out the Median DOM chart since 2015:

My investors are looking to accumulate what they can with these trends in mind. Flip investors will have their projects listed in the peak months of the coming year and landlords will have their properties available for rent in the peak season where median/average rents across the city are highest. The timing is great in this regard!

Freddie Mac 30-year Fixed Rates for November were 2.77% (.7 pts) which is almost a full point below where they were the same time last year; which was still 1.17 points below November 2018! With this extreme low in interest rates, the going assumption is that home buying has never been better assisted which is likely a big candidate for the above graph movement. 

San Antonio's unemployment spiked hard toward the beginning-middle of 2020 but is looking strong in a recovery barring any other major lock downs. The U.S Bureau of Labor Statistics has the unemployment figures from September at 7.8%(p) - a full 5.5% reduction from the peak of COVID unemployment (still about double the city's recent unemployment figures which typically range in the 3-4% range since 2015). With hopes of a successful vaccine and continued general optimism in us getting past the COVID situation San Antonio should track back to these lower unemployment figures sooner rather than later. (Fingers crossed!) 

With a current population of an estimated 2.3+ million, the city is growing at a projected rate of 1.88% annually and is consistently in the top 10 fastest growing cities in America. A recent article on sacurrent.com claims San Antonio could add 1.1 million new residents by 2040. This growth is pretty staggering and with a shortage of affordable housing at the moment, the city will really need to keep up with this increased demand. 

To review: 

1. The city's home valuations are appreciating steadily and the accumulation season is in full effect. 

2. Interest Rates are at CRAZY lows at the moment setting the stage for a BIG BUYING season coming up.

3. Employment numbers are improving and should continue to improve with optimism surrounding public safety and vaccine production/distribution. 

4. Population increase further boosts demand for an already short supply of affordable housing (most recent market report showed just above 2 months of inventory available!!!)

5. TAX SEASON IS AROUND THE CORNER! Investors need expenses!!!

6. Timing for your projects hitting the market post rehab is PRIME!!

Tell me what you guys are seeing? Do you agree or disagree? What are some other variables in the market you'd throw in to the mix that you think will have an effect in the coming year? Let me know!

[Christopher Campbell]

@Melvin Maxwell

That's a great question and it's not really too easy to pin point what the exact impact is going to be. In my discussions with other pros, brokers, and the more seasoned investors that have been doing this for a while I've gathered a few notes that might shed better light into the situation. 

For one, although the foreclosures are stacking up, from what I hear the banks and REOs are going to need to be smart about releasing them. If they do it all at once it will invite the opportunity for them to take larger losses rather than if they release in doses they could potentially fetch more of their money back on an individual property basis. So there may be a lot of what some call "shadow inventory" but the market likely won't see all of it at once. So it's possible that this will impact the available inventory and the overall market with a lot less force than people may think.

Another thing to consider is that who is going to get to the motivated seller that's facing a foreclosure first? The demand is CRAZY high right now. There are A LOT of active investors with money to spend that are marketing like crazy to these sellers right now. Does the seller want to get foreclosed on or get the property sold through off-market means before hand? So a lot of this inventory may never even reach the bank's hands. Obviously there are some situations that are worse than others and some homeowners may not actually have a choice.

Something else to think about is that there is already a massive shortage of available inventory at the moment. This leads me to think that although there may be a sudden influx of new inventory, the demand that has been stacking up all these months is going to very rapidly accumulate this inventory and this sudden rush will probably dissipate as fast as it arrives. This all is purely speculative but there might be a good, but ultimately short window, to get in at lower prices in the off-market realm. 

To sum this up and to answer your question, I think the demand is high enough that when this inventory hits the market that it will very quickly get scooped up and we'll be back into a more "normal" situation, if you will. The short term and long term prospects still look promising as the market continues to seek equilibrium. The pillars of our local economy remain strong and improving, large amounts of migration to Texas cities is still in progress, new businesses are arriving (especially like the California giants making the leap to Texas), positive COVID vaccine news, and all the things I mentioned in the post should hold firm barring any major unforeseen meltdowns. 

I hope this helps! Let me know what you think!

Cheers!