After four quarters of steady gains, the Winter 2024 RCN Capital/CJ Patrick Company Investor Sentiment Index reveals a sharp decline in real estate investor optimism, with the index dropping 27 points to 97, its lowest in a year.
Investor confidence in the current market is in freefall, with only 35% believing the market is better than a year ago, compared to 68% in the third quarter. Those who felt market conditions have worsened nearly doubled, from 13% to 25%.
Despite some optimism for the next six months, with 42% expecting improvement, this is lower than prior survey results. The high cost of financing continues to be the biggest challenge for investors, cited by 52% of respondents.
Insurance issues have also surged in importance, with nearly 70% of investors acknowledging that insurance costs influence their investment decisions, and over 53% reported missing deals due to insurance-related problems.
Jeffrey Tesch, CEO of RCN Capital, explained, “Rising interest rates on purchase loans and negative pressure on rent prices may have caused investor sentiment to reverse course after a year of steady improvement.” He also noted that rental property investors, who tend to be less optimistic, represented a larger proportion of survey respondents, which may have impacted the results.
Fix-and-flip investors remain more positive than rental property investors. Over 45% of house flippers believe market conditions have improved over the past year, compared to 31% of rental investors. However, optimism has declined across all categories.
Rick Sharga, CEO of CJ Patrick Company, remarked, “While there are limits to what the Federal Government can do to improve the overall housing market, any initiatives that remove extraneous regulations, make land available for development, and stimulate affordable home construction will benefit builders, real estate professionals, investors, and consumers.”
Insurance has become especially problematic in Florida, where Hurricanes Helen and Milton have left significant damage. In the state, 57% of rental investors and 41% of flippers identified insurance as a major issue. Nationally, rising premiums and limited policy availability are increasingly influencing investment decisions.
Investors expressed skepticism about Donald Trump’s proposed tariffs and mass deportations. Concerns included higher costs (51%), supply chain disruptions (48%), and reduced profit margins (45%). Nevertheless, 37% of respondents supported programs incentivizing affordable housing construction, and 36% favored eliminating unnecessary regulations.
Sharga commented, “An administration headed by a long-time real estate developer like Donald Trump could result in a friendlier environment for real estate investors over the next four years.” While 21% of rental investors plan to purchase more properties in 2025, only 7% of flippers share that intention, with 45% intending to buy fewer homes.
Despite ongoing challenges, 55% of respondents expect home prices to continue rising, though most anticipate increases of less than 5% in the coming year.
