Is Dignowity Hill (San Antonio) a bubble or an investors dream?

Question

San Antonio investors are all familiar with the infamous Dignowity Hill. I myself have done deals with investors in the area and they have come out great in the end. With what seems like a rehabbed home on every block, the available inventory for rehabbed homes is sky high, which can be both good and bad.

What are you guy's opinion on this area in the current state? I still feel their is some opportunity there, but is the boom almost over? Thoughts, opinions and comments are all appreciated.

Thank you!

Seth Teel · Answer

I think it's a grossly over-inflated market in that neighborhood.  I feel this way for several reasons:

• There are still dope addicts and homeless wondering the streets day and night
• Crime is still high relative to other neighborhoods adjacent to downtown
• The infrastructure is terrible. Some of the worse streets in the urban core, missing and overgrown sidewalks, alleys and streets (yes, streets) that have been vacated by the city.
• Plenty of housing stock that needs significant renovation or needs to be demolished.
• Increased days on market over the last 365 days.  
• Highest increase in property taxes in Bexar County

All of these items are creating a perfect storm to end up upside down on a property or find yourself sitting on flip project you can't sell because the market has plateaued and now you're overpriced.

@Tanya Lechner you mention 919 N. Pine, but that property was actually two fully renovated houses sold as a pair. This was not noted in MLS due to some issues with the lender, and the buyer needing it to be reflected as one home.  $313/sf is not an accurate reflection of the Price Per Square Foot (PPSF) in Dignowity, and most good appraisers will see it as an anomaly and throw it out or reach out to the listing agent to get the full story.

I renovated and sold the next highest sold comp: 819 Dawson @ $200/SF.   I think the $200/sf to $220/sf (depending on size) is a much more realistic PPSF for the area.  That being said, I still think it's over-inflated given the factors mentioned above.

Another factor to consider in the area is there is a lot of new development, most on micro-lots with zero yard and minimal outdoor space.  While this is lucrative for developers, I think it's going to be difficult for these homeowners to resell due to limited space and the fact that they've purchased at the height of the market.

There are definitely good things happening in this area, but it's a long way away from being a stable neighborhood.  And when you think about it in the context of other rapidly appreciating neighborhoods adjacent to downtown (Tobin Hill, Lavaca, etc.), I can't justify a similar PPSF when these other neighborhoods don't have the same challenges this one has.

I am sure the opposite can be argued, but for me, I will sit on the sidelines until Dignowity calms down a bit.

Tanya Lechner · Answer

Hey Brandon, I think that is a great question and would love to hear other opinions as well! From my experience, the DOM is lengthy and it's because investors are testing the market. Eventually a buyer is going to come in and pay because of the hype which, in turn, raises the values altogether. As long as this continues to happen, that area is going to continue to rise.

Also, with the Hays Bridge project on the horizon, there is still room for growth. Once that is completed, I may worry about values stabilizing or decreasing. 919 N Pine recently sold for $313/ sq ft so I don't see it happening any time soon! The only concern I see in the market as a whole is the rise of interest rates which is going to decrease the number of buyers. Other than that, Dignowity is one of the places to be.

I love that area for investing but I'd rather find the next Dignowity HIll and hold for a while!

Brandon Miller · Answer

@Tanya Lechner @Seth Teel

Thank you guys for the response. Very informative!