About 63% of real estate investors recently surveyed cited the availability of inventory as the top challenge for the residential real estate investing business, according to the Winter 2021 RealtyTrac Investor Sentiment Survey, which measures investors’ perspectives on real estate investing.

Rising home prices were cited as the second biggest challenge today. Sixty percent of investors see them as a concern.

“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,” says 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 believe they’ll continue to face the same challenges over the next six months in the market: the lack of inventory (57%), rising home prices (46%), increased material costs (35%), and rising interest rates (34%).

The National Association of REALTORS®’ latest housing report showed the inventory of existing homes for sale reached the lowest number on record in December. As are home buyers, investors are seeing a shrinking number of housing options.

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. Thirty percent of investor respondents also 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 says. “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.” Still, 54% of the real estate investors surveyed say they aren’t backing off and plan to continue to buy and rent properties.