"It’s not a national housing bubble," we’ve heard.  "All real estate is local." and "Only formerly hot markets such as Phoenix, Las Vegas and Florida will be affected."  Although not as dramatically as in other more "bubbly" areas, cities in less overheated areas are also beginning to show signs of cooling.  One such "baby bubble" city is San Antonio.

San Antonio was a market experiencing modest growth until, according to the Research Center at Texas A&M:

The new home market party started when Fortune magazine anointed San Antonio the nation’s strongest housing market, predicting an 8.3 percent home price appreciation in 2006. Out-of-town investors flooding into San Antonio this year have glutted the market with rental homes, and the average rent has dropped $202 a month since this time last year, from $1,301 to $1,099, according to the San Antonio Board of Realtors. At the end of October, renters had their pick of more than 2,000 homes. So far this year, more than 10,650 homes have gone onto the rental market, 22 percent more homes than last year. [Look for many of these rentals to make their way back into the resale market.]

Here’s what that little "party" did to year-over-year median price appreciation in San Antonio: [Data from the Research Center at Texas A&M]

As you can see, San Antonio experienced a similar rise and fall in appreciation as did other "bubblier" markets.  They also saw a similar drawdown and increase in inventory as speculators moved into and out of the San Antonio market: [data not available for Oct-Dec in 2004 and 2005]

Now to put this in perspective, let’s compare San Antonio’s price appreciation against a much "bubblier" market- Phoenix:

San Antonio did not peak until after the Phoenix market started to decline, and it never reached the heights reached by the Phoenix market.  Therefore, it is not expected to suffer the same level of decline.  What we can see, however, is that the same forces that brought about large bubbles in formerly "hot" markets have affected other communities as well.  That being the case, we expect the negative implications of a contracting market to spread beyond the more infamous "bubble" markets to "baby bubble" communities as well.