While institutional investors and iBuyers thrive in the current housing marketplace with their large capital reserves, the conditions are making life hard for individual investors.
A 48.1% share of residential real estate investors found the environment worse than a year ago, according to a survey conducted by Attom Data Solutions affiliate RealtyTrac. Low inventory and steady price growth present the largest obstacles. Sentiments on the market’s future are split, as 36.6% feel those conditions won’t change in the next six months, while 32.5% foresee improvements and 30.9% think the challenges will be heightened.
“Coupled with strong competition from traditional homebuyers and rising material and labor costs, it’s no wonder that individual investors believe that the market is less favorable today than it was a year ago,” Rick Sharga, RealtyTrac executive vice president, said in a press release. “Investors are more optimistic about the future than they are about current market conditions, but they do worry about inflation causing material and labor costs to rise, making affordability an issue for prospective homebuyers and renters, and increasing the costs of financing.”
Of the over 300 investors surveyed, 62.9% pointed to the high appreciation rate of home values as their biggest challenge today, while 57.8% blamed the dearth of supply. Behind those factors, 36.1% cited material costs, 28.8% said buyer competition from consumers and 23% said competition from institutional buyers.
Nearly half of the investors surveyed said that price and supply concerns put a damper on their six month outlook. However, worries over future interest rate growth shot up to 28.2% of respondents versus merely 7.4% who were concerned about the rate rising when the survey was conducted. The Federal Reserve recently announced it will taper its bond buying program, likely causing rates to rise. The latest forecast from Fannie Mae projects 30-year fixed rate mortgages to finish this year at an average of 2.9% and jump to 3.2% by the end of 2022.
