Real estate investors cite inventory shortages as their biggest challenge

Home inventory shortages were cited as the number one challenge by 63% of residential real estate investors in a recent survey.

The Winter 2021 RealtyTrac Investor Sentiment Survey, which measures investors’ perceptions of the real estate investing industry, also cited rising home prices as their second major concern, according to 60% of investors.

RealtyTrac said the findings extend a trend witnessed in its previous two surveys. It concludes that the residential real estate market is no longer as healthy as it was last year.

“Similar to our last two surveys, the problems of low inventory and rising home prices are those most often cited by individual investors across the country,” said Rick Sharga, executive vice president at RealtyTrac. “Together with supply chain disruptions which have caused product shortages and increased material costs, it is not surprising that individual investors think that the market is not as healthy today as it was a year ago.”

Investors don’t see much end in sight either, with 57% saying they believe the lack of inventory will continue to be a challenge over the next six months. Another 46% said they believe home prices will continue to be a challenge this year, while 35% cited increased material costs and 34% said they’re worried about rising interest rates.

The report comes after the National Association of Realtors said home inventory hit its lowest volume on record in December. Both investors and home buyers are suffering from the reduced options available.

Concerns over increasing inflation are also growing among investors, the survey shows. About 39% of respondents said they believe that higher inflation will increase the cost of labor, materials, and supplies and make it more difficult for them to generate adequate profits. Another 30% of investors said that they believe more inflation could lead to higher mortgage rates, which could hurt affordability and weaken demand.

“A looming concern is that of inflation,” Sharga said. “About 88% of the investors surveyed were concerned about inflation having an impact on their business, whether that was due to higher material and labor costs, higher interest rates, or rising consumer prices that might weaken demand from potential home buyers and renters.”

That said, the majority of investors are still bullish overall, with 54% say they aim to continue buying and renting out more homes.