Results from a new RealtyTrac survey, which show that real estate investors find the current housing market an unfavorable one for investing, made me laugh in the "I could have told you that" sort of way.
Today's housing market is the furthest from a buyer's market we've ever experienced, with high demand coupled with record-low supply. This means frustration for all buyers -- including real estate investors who do this for a living.
RealtyTrac, a real estate information company that also runs an online marketplace for foreclosures and distressed homes, surveyed more than 300 individual real estate investors from across the country on the state of the market, problems investors face, and possible opportunities.
About 40% of respondents were landlords, about 32% were flippers, about 8% were wholesalers, and the rest were other types of real estate investors. Not surprisingly, survey respondents are concerned mostly with rising home prices and low inventory.
The current investing environment
Regarding how this year's real estate investing environment compares to last year's, about 48% of respondents said this year's climate is worse or much worse than last year's, about 22% said it was better or much better, and about 30% view it as the same.
The future of the market in six months
When asked what the outlook for real estate investing is over the next six months, 30% of respondents think the market will be worse or much worse than today, 34% think it will be better or much better, and about 36% think it will stay about the same.
The three biggest challenges currently
When asked which are the biggest challenges regarding real estate investing, the top three answers were rising home prices (63%), availability of inventory (57%), and increased material costs (36%).
Of the top concern of rising home prices, most respondents (about 45%) think home prices will continue to rise over the next six months' time, about 29% think prices will decrease, and the rest think prices will remain about the same.
Other challenges were (in order):
- Competition from iBuyers
- Rising interest rates
- Competition from homebuyers
- Access to capital
- Availability of skilled labor
The three biggest challenges real estate investors think they'll face six months from now remain the same, but the percentages changed. Rising home prices and availability of inventory carried equal weight at about 49%, with increased material costs being a top concern for about 37% of respondents. The order for the other challenges remained the same.
Inflation is a big concern for real estate investors, as about 81% are concerned about higher prices affecting the ability to invest. The concern is about material and labor costs rising, the higher cost of living making it difficult for prospective homebuyers and renters, and it being more expensive to finance a deal.
Will we see more foreclosure activity?
There were practically no foreclosures during COVID-19 due to foreclosure moratoriums. Now that the ban on foreclosures is over, about 30% of survey respondents think foreclosure activity will return to normal, and 33% think there will be more foreclosures than normal (but not as many as 2008 levels).
The Millionacres bottom line
The RealtyTrac survey doesn't paint a pretty picture for either current conditions or the near future for individual real estate investors. And it doesn't look like any sort of silver lining is in sight, with iBuyers and other institutional investors competing with mom-and-pop landlords and fix-and-flip investors for deals.
RealtyTrac points out there is a record $23 trillion in homeowner equity, meaning most homeowners in default will probably sell their properties before they go to foreclosure auction. It's these deals that should probably be on any real estate investor's radar.