Last year’s fickle real estate investors continue to leave a sour aftertaste in San Antonio’s new-home market.Builders started 27 percent fewer homes in the second quarter compared to the same period in 2006. And more than 3,100 vacant new homes were on the market at the end of June. That’s 1,132 more homes than last summer.

A new report released today from Metrostudy, a housing research firm, shows that San Antonio builders continue to sell off excess inventory in an effort to shake the aftereffects of 2006.

That was San Antonio’s record real estate year, but also a time when out-of-town speculators gobbled up new homes — especially those priced under $125,000.

Some of those investors had been trying to replicate a speculative scheme that had worked so well in cities on the East and West coasts before those markets turned south.

The idea was to put a contract on a house, wait for prices to appreciate during the construction process and then sell it to someone else before ever really taking ownership.

But San Antonio home prices appreciated only moderately. So when it came time to close, and the prices hadn’t soared, many investors walked. All this happened at the tail end of 2006, and San Antonio still is feeling the effects.

“You had this momentum building with local buyers, and it was artificially stimulated by speculative investors,” said Jack Inselmann, vice president of Metrostudy’s U.S. Central Division.

Metrostudy has been advising its clients since last fall to pull back on construction and to get rid of excess inventory, and it appears that the relatively tight-knit building community has been listening. San Antonio has had three straight quarters where the number of new homes sold exceeded the number started.

“More closings than starts? That’s all I want to hear,” developer Norman Dugas said. “That means the builders are pulling back.”

Now the market is returning to normal, with San Antonio residents as the primary buyers of new homes.

Despite the investor departure, local builders are heading toward their third-best year on record and should complete between 14,000 and 15,000 new homes in 2007, Inselmann said.

“It’s not a quick fix,” he said. “You can’t do it in a couple of quarters. We want to be healthier in the end of the year. That’s the goal.”

With job growth and low unemployment, San Antonio still remains a strong market — one of a handful in the country — even if home sales are no longer as frequent.

“Texas continues to be the healthiest housing market of all states. And San Antonio continues to be one of the better markets of all the cities,” Inselmann said.

Randall Allsup, manager of the San Antonio division of Metrostudy, said it looks like builders will be able to sell off the oversupply of homes that exists in most price ranges now.

“The new-home industry has been really responsive in doing what they need to,” Allsup said. “It looks like we’re going to have a soft landing here.”

Builders also have had to contend with this year’s rainy weather slowing down construction, as well as the meltdown in subprime mortgage lending that has eliminated many potential first-time home buyers from the market.

For builders who have laid off workers and for subcontractors who haven’t been able to work as much due to the rain, 2007 likely feels more painful than the word “adjustment” might imply.

“We’re going to have our third-best year in starts, and our second-best year in closings,” Inselmann said.

“It’s still some good numbers. But a decline is not as fun and easy as a market that is growing.”

Source:

http://www.mysanantonio.com/business/realestate/stories/MYSA080307.01C.FewerHouses_0803.2b2682c.html