Is San Antonio’s reputation slipping as a bastion of affordable housing?
At first glance, data from Texas A&M’s Real Estate Research Center shows a sharp decrease in housing affordability between 2021 and 2022. Combine that with data from the San Antonio Board of Realtors, which has posted monthly increases in the median cost of a home since January, and it might be a compelling conclusion.
But data in a vacuum can be misleading, points out Adam Wayne Perdue, a research economist at the center.
“The reason affordability has dropped so much in the last two quarters is because of interest rates,” said Perdue. “What you’re seeing on the index is the interplay between the increases in mortgage rates defeating any fall in prices over the last year.”
Because the housing affordability index maintained by the center takes cost input from multiple sources, the metric stands to be more dynamic than static in times of great interest rate upheavals.
The median price increases noted since January by SABOR, Perdue said, are attributable to the seasonality of the housing market.
“The increases since January are still below where I would have expected them to be at the end of 2022,” Perdue said. “So, this is actually slower price growth than normal.”
Where affordability will actually start to decline, he said, is if median housing costs exceed wage growth along flat interest rates. That scenario is unlikely, Perdue noted, while allowing a wide berth for any actions undertaken by the Federal Reserve.
“If we don’t end up in recession by the end of the year, wages are likely to grow faster than prices are, so affordability will likely increase a little bit,” Perdue said.
There is another caveat, however. Summer months are often a bellwether for market behavior, and when prices are expected to climb most sharply. But high interest rates might yet again be throwing a monkey wrench into typical buying and selling behaviors.
“We have some concerns that summer months might not be as busy as usual due to high interest rates because fewer people will be looking to trade up — but at this point it’s an open question,” Perdue said.