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Investor Sentiments Predict Tight Inventory, Inflation into 2022

The latest edition of the RealtyTrac Investor Sentiment Survey has confirmed something many investors already knew: the real estate market is in a worse place than it was a year ago. 

The survey by RealtyTrac, a property information company, found that 49% of a panel of real estate investors believed that the market is worse or much worse than it was a year ago. 30% responded that the market was investment in about the same shape as it was a year ago, but when looking to the future, 43% of respondents predict that the market will be in about the same shape as it is now in six months while 31% predict the market will be in a worse place. 

In addition, a majority of respondents (63%) believe that the lack of available inventory is having the biggest impact on the current market followed by rising home prices (60%). 

“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, an ATTOM company. “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 do not predict to see much of a change in the next six months either; the lack of inventory (57%) along with rising home prices (46%) will remain the foremost obstacles for investors during this time period. This is followed by problems with increased materials costs (35%) and rising interest rates (34%). 

Inflation was also cited as a major concern among investors. In the most recent meeting of the Federal Reserve’s Open Market Committee, Chairman Jerome Powell said that the recent rise in inflation is not as transitory as they originally though, a comment which worried investors. 39% of respondents deemed inflation as a significant concern due to its effects on labor and raw materials, which makes it harder to turn a profit. 

Meanwhile, 30% of respondents believe that more inflation can lead to higher mortgage rates that hurt affordability and weaken demand. 

“A looming concern is that of inflation,” Sharga noted. “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.” 

Additionally, 43% of investors think that foreclosure activity will rise to higher than normal rates, but stay below the level seen during the Great Recession. About 54% of respondents planned to buy and rent properties, while only 34% identified themselves as fix-and-flip investors. 

About Author: Kyle G. Horst

Kyle G. Horst is a reporter for DS News and MReport. A graduate of the University of Texas at Tyler, he has worked for a number of daily, weekly, and monthly publications in South Dakota and Texas. With more than 10 years of experience in community journalism, he has won a number of state, national, and international awards for his writing and photography including best newspaper design by the Associated Press Managing Editors Group and the international iPhone photographer of the year by the iPhone Photography Awards. He most recently worked as editor of Community Impact Newspaper covering a number of Dallas-Ft. Worth communities on a hyperlocal level. Contact Kyle G. at [email protected].

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