Real Estate Investors Have Soured on the Current Market According to the Fall 2021 RealtyTrac® Investor Sentiment Survey™

Individual residential real estate investors are concerned about the impact of rising home prices and the lack of housing stocks on their real estate investments. The perceived risk of losing market share to iBuyers and other institutional investors is also increasing.

Irvine, Calif., September 29, 2021 – (BUSINESS WIRE) – RealtyTrac® recently completed its second RealtyTrac Investor Sentiment Survey ™, which surveyed over 300 individual real estate investors across the country to find out how they see and do the market what problems they have and opportunities they faced and their impression of today’s real estate investment environment.

• 48% of investors felt that the investment market was worse or much worse than it was a year ago

• Almost 63% of respondents cited rising home costs as one of the biggest challenges for investing in residential real estate

• The lack of available inventory was identified as the second biggest challenge (57%) by investors

“Real estate investors continue to face the dual challenges of low inventory and soaring property prices,” said Rick Sharga, executive vice president of RealtyTrac, an ATTOM company. “Coupled with stiff competition from traditional homebuyers and rising material and labor costs, it’s no wonder that individual investors believe the market is less cheap today than it was a year ago.”

About 48% of investors think the investment market is worse or much worse than it was a year ago, and 36% think conditions will stay the same for the next six months. Rising home prices (63%) have replaced inventory shortages (57%) as the biggest challenge cited by investors, despite switching places on the investor’s six-month outlook. Competition from traditional homebuyers (28%) dropped out of the three biggest problems for investors and was replaced by increased material costs (36%).

Still, many investors believe the continued competition from homebuyers will continue to be a challenge, and 27% said it is likely to remain a major problem in six months’ time. The unprecedented demand from homebuyers has created unusual market dynamics for private investors: instead of competing with larger institutional investors, mom and pop investors are competing with more traditional private customers.

The story goes on

The investors taking part in the survey are representative of the majority of real estate investors – the typical mom-and-pop investors who buy between 1 and 10 properties a year. It is these individual investors who have the greatest impact on market conditions. Almost 90% of the country’s 19 million single-family homes are owned by mom-and-pop investors, while the largest institutions – taken together – own less than 2%. The fix-and-flip market is similarly populated by thousands of retail investors who average about one flip a month but are now facing growing competition from what are known as iBuyers like Opendoor, Offerpad, and Zillow, which are essentially institutions who work at Flipping Scale.

While participants in the previous RealtyTrac survey were split almost equally between fix-and-flip and buy-and-hold investors, those taking part in the Fall 2021 investor sentiment survey included more investors buying properties for rental purposes to have. This could reflect current market conditions – ATTOM Data has reported that the number of flips in the second quarter of 2021 decreased year over year, as did the gross profit of the pinball machines.

“Investors are more optimistic about the future than they are about current market conditions,” said Sharga. “But they do worry about inflation – about 81% of the investors surveyed were concerned that inflation is driving up material and labor costs, making affordability a problem for potential homebuyers and renters, and driving up financing costs.”

The foreclosure factor

Due to the government’s foreclosure moratorium and the CARES mortgage forbearance program, foreclosure activities have virtually ceased today. While foreclosure activity in August was up 27% from July numbers, it was 70% lower than in August 2019, before the COVID-19 pandemic and the implementation of state foreclosure programs. The foreclosed home inventory is now at its lowest ever recorded in the RealtyTrac database, adding to the extreme shortage of homes for sale.

While it is unrealistic to expect default activity not to pick up a bit after these government safeguards expire, the investors who participated in the survey do not expect a flood of distressed properties. About 30% of respondents believe that foreclosure activities will return to their normal historical level (about 1% of mortgage loans in a given year), while 33% said foreclosures are above normal levels but remain well below those that during the year the great recession was seen. With a record $ 23 trillion in homeowners, it is likely that most defaulting homeowners will be able to sell their properties before foreclosure, and very few will ultimately be repossessed by banks and then put up for sale.

About RealtyTrac

Founded in 1996, RealtyTrac publishes the largest database of foreclosures information in the United States along with other real estate and mortgage data used by real estate investors and professionals to find, analyze and buy distressed residential and commercial real estate. RealtyTrac is owned and operated by ATTOM Data Solutions, a leading provider of publicly recorded tax, deed, mortgage, and foreclosure data, as well as proprietary neighborhood and parcel risk data for more than 150 million US homes. More information is available at www.RealtyTrac.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/2020929005109/en/

contacts

Alyson Austin
Gaffney Austin, LLC
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949-403-0484