Individual residential real estate investors are concerned about the impact of rising house prices and lack of home inventory on their real estate investments. The perceived risk of losing market share to iBuyers and other institutional investors is also increasing.
IRVINE, California, September 29, 2021– (COMMERCIAL THREAD) –RealtyTracÂ® recently completed its second RealtyTrac investor sentiment surveyâ¢, by interviewing over 300 individual real estate investors across the country to find out how they perceive the market, what issues and opportunities they face and how they feel about the current real estate investment environment.
48% of investors think the investment market is worse or much worse than it was a year ago
Almost 63% of survey respondents identified rising home costs as a major challenge for residential real estate investing
Lack of available inventory was identified as the second biggest challenge (57%) by investors
âReal estate investors continue to face the twin challenges of low inventory and rising home prices,â said Rick Sharga, executive vice president of RealtyTrac, a ATTOM business. âIn addition to stiff competition from traditional home buyers and rising material and labor costs, it’s no wonder that individual investors think the market is less favorable today than it is. ‘it was not a year ago. “
About 48% of investors believe the investment market is worse or much worse than it was a year ago, and 36% believe conditions will stay the same over the next six months. Rising home prices (63%) replaced lack of stocks (57%) as the # 1 challenge cited by investors, although they are shifting places in the six-month investor outlook. Competition from traditional homebuyers (28%) fell out of the top three issues for investors and was replaced by rising material costs (36%).
Still, many investors believe the continued competition from homebuyers will continue to be a challenge, and 27% said it will likely remain a major concern six months from now. Unprecedented demand from home buyers has created unusual market dynamics for individual investors: instead of competing with large institutional investors, family investors find themselves competing with more traditional home buyers.
The investors who participated in the survey are representative of the majority of real estate investors – the typical family investors who buy between 1 and 10 properties per year. It is these individual investors who have the most influence over market conditions. Almost 90% of the country’s 19 million single-family rental properties are owned by family investors, while the largest institutions collectively own less than 2%. Likewise, the fix-and-flip market is populated by thousands of small investors who average around one flip per month, but now face increasing competition from so-called iBuyers like Opendoor, Offerpad and Zillow, which are basically institutions that do escalating flips.
While respondents to the previous RealtyTrac survey were almost evenly split between fix-and-flip and buy-and-hold investors, respondents to the Fall 2021 Investor Sentiment Survey included more investors. who have purchased properties for the purpose of renting them out. This could be a reflection of current market conditions – ATTOM Data reported that the number of flips in the second quarter of 2021 was down year over year, as were pinball gross profits.
âInvestors are more optimistic for the future than for current market conditions,â noted Sharga. “But they’re worried about inflation – around 81% of investors surveyed feared inflation would drive up material and labor costs, making affordability an issue for buyers and renters. potential and increasing financing costs. “
The foreclosure factor
Today, foreclosure activity has all but ceased due to the government foreclosure moratorium and the CARES Act mortgage forbearance program. While August’s lockdown activity was up 27% from July figures, it was 70% lower than in August 2019, ahead of the COVID-19 pandemic and the implementation of the government foreclosure prevention programs. The inventory of homes in foreclosure is now at the lowest level ever recorded in the RealtyTrac database, contributing to the extreme shortage of homes available for sale.
While it is unrealistic to expect default activity not to increase somewhat after these government protections expire, investors who responded to the survey do not expect a flood. of distressed properties. About 30% of respondents believe foreclosure activity will return to its historic normal level (around 1% of mortgages in any given year), while 33% said foreclosures will exceed normal levels, but would remain well below the levels seen during the Great Recession. With a record $ 23 trillion in equity, it is likely that most delinquent homeowners will be able to sell their properties before the foreclosure auction, and very little will eventually be taken over by the banks and then put up for sale.
Founded in 1996, RealtyTrac publishes the largest database of foreclosure property information in the United States, as well as other real estate and mortgage data used by real estate investors and professionals to find, analyze and purchase properties. residential and commercial in difficulty. RealtyTrac is owned and operated by ATTOM data solutions, a leading provider of registered tax, deed, mortgage and public foreclosure data as well as proprietary neighborhood and lot-level risk data for more than 150 million properties in the United States. For more information visit www.RealtyTrac.com.
See the source version on businesswire.com: https://www.businesswire.com/news/home/20210929005109/en/
Gaffney Austin, LLC