Real estate investors are facing a terrifying winter storm
It's mostly doom and gloom heading into 2025, according to a quarterly survey released this week. RCN Capital and CJ Patrick Co. Their Winter 2024 Investor Sentiment Survey found that only 35% of investors think the market is “better” or “better” than a year ago — and many don't think things will improve anytime soon.
Survey respondents answered four questions about the current market outlook, the future market outlook, and the number of properties they expect and have purchased compared to a year ago.
Positive sentiment has dropped sharply from companies where 68% of respondents think the market is improving. In addition, the share of investors who felt conditions were deteriorating increased from 13% in the fall to 25% in the winter. Overall, investor sentiment fell 27 points to 97 – its lowest level in a year. However, despite the negative attitude, the share of respondents planning to buy property in the near future has improved.
Are investors optimistic about the next six months? According to the survey, most do not see the light at the end of the tunnel. Only 42% expect the market to improve. By comparison, 71% of respondents to the fall survey expected the market to improve.
“Rising interest rates and downside pressure on loans could cause investor sentiment to reverse after a year of steady growth,” RCN Capital CEO Jeffrey Tesch said in a statement. “This particular iteration of our survey also had an unusually high percentage of respondents who were less optimistic rental property investors. Maybe this colored the results a little.”
Long-term rental property investors were by far the least optimistic group. Only 31% believe the current market is better than last year, and only 33% think things will improve in the next six months.
Conversely, short-term investors were more optimistic about the future of the housing market. In the winter survey, almost half (45%) of home swimmers believe conditions have improved compared to a year ago, and 48% believe conditions will improve over the next six months. Even in this group, only 28.7% reported a positive return on investment in the third quarter of 2024, according to data released in December.
The survey found that a majority (55%) of both groups of investors agreed that home prices would continue to rise.
Among the less optimistic, two familiar but glaring problems persist in the real estate investment market.
Similar to the fall survey, funding costs remained the top concern among respondents. This was followed by the lack of investor competition, growth and presence. According to the report, the 30-year lending rate was close to 7% in December after approaching 6% in the fall.
Cost was also a concern of respondents, according to the results of the fall survey. About 70% of investors said that insurance costs influence their investment decisions, and 53% said that insurance costs make a deal.
Some states were more difficult than others in terms of insurance costs. An impact-based survey was highlighted as a prime example. In Florida, more rental property investors (57%) cited insurance costs as a major concern.
Political processes were also mentioned. Respondents to the fall survey expected to win the 2024 presidential election, but when that didn't happen, winter respondents were worried about the plans of the arrivals and the large number of undocumented immigrants.
“While there are limits to what the Federal Government can do to improve the overall housing market, any initiatives that eliminate outside regulations and stimulate affordable home construction will benefit developers, real estate professionals, investors and consumers,” said Rick Sharga, CEO of CJ Patrick Co. .
