The average rent in San Antonio rose nearly 6% during 2016, one of the steepest rent increases of any city in the country in the past year, News Radio 1200 WOAI reports.
Dennis Cisterna of Investability Real Estate Inc says the average San Antonio apartment and home rent jumped 5.8% in the past year, making San Antonio one of three Texas cities to have rent increases among the top 20 cities nationwide.
Cisterna says you can blame several factors, but it all comes down to a 'perfect storm' of a strong economy and very weak home construction.
"You've added 40,000 plus jobs in San Antonio, and yet there have only been 18,000 building permits issued," he said.
One of the reasons housing contsruction is down is because of the amazing profitability of rental property. New apartment complexes are springing up seemingly everywhere around the city, adding thousands of apartment units to the market.
Cisterna says, due to a variety of factors, ranging from strict new mortgage and down payment restrictions imposed after the housing crunch of 2008, added to the skyrocketing costs imposed by local restrictions, from SAWS impact fees to the city's bizarre 'tree ordinance,' San Antonio, as is the entire country, is in a home construction slump.
"We built the same number of homes in 2016 as we built in 1961, even though the population of the U.S. today is close to 350 million, and it was 200 million then."
Another thing pushing up rental rates is simple supply and demand. People today who are at the prime first-time home buying age, betwen 25 and 35, find themselves overburdened by crushing student loan debt, unable to raise the 20% minimum down payment now required under post 2008 regulations, and held back by lagging incomes.
"Its hard to get a mortgage, the market remains tight, and young people are not only saddled with student loan debt, but other debt in general."
He says this may be part of the 'new normal' for first time homebuyers, at the same time that skyrocketing home values are pushing up property taxes for homeowners.
"Housing is becoming a bigger percentage of the average person's income," Cisterna said.
Cisterna and other analysts say it is possible that a significantly lower percentage of Millennials will become homeowners that Generation X or Baby Boomers. That will not only be a drag on the huge sector of the U.S. economy that relies on home ownership related purchases, from Home Depot to furniture stores to remodelers to appliance and electronics sales firms, but it will also damage the ability of the Millennials to save for retirement. For the vast majority of Americans, the value of their home is their greatest asset.
He says there are a couple of scenarios on the horizon. He says rents in every market will reach a local maximum, where the local economy can't support rents any higher. He speculates that is why Austin has not joined San Antonio, Dallas, and the Rio Grande Valley as the Texas cities on the list of the fastest growing rental markets in the country.
He says a widespread economic downturn could also serve to 'recalibrate' the rental market.
But he says for now, he has some sage financial advice:
"Buy an investment property if you have the ability to," he said. "It is certain that property is going to be occupied, and will keep selling for more and more every year."
IMAGE; GETTY